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Bitcoin is approaching historical highs! Which three bitcoin concept stocks are worth paying attention to?

Updated on October 15, 2024; First published on March 14, 2024.

Bitcoin is approaching historical highs! Which three bitcoin concept stocks are worth paying attention to? -1

On October 15, 2024, Bitcoin price returned to the $66,000 mark, becoming the focus of the market.

With the market's recovery, investors are beginning to pay attention again to concept stocks related to cryptocurrencies.

The so-called concept stocks of cryptocurrencies refer to publicly traded company stocks related to cryptocurrencies. These companies are usually associated with the cryptocurrency ecosystem, engaging in areas such as cryptocurrency mining, trading platforms, payment solutions, and blockchain technology development.

Their stock prices are typically affected by the volatility of the cryptocurrency market. Therefore, when cryptocurrencies perform well, the stock prices of these companies may rise accordingly, and vice versa.

According to the analyst from Motley Fool, $Coinbase(COIN.US)$$MARA Holdings(MARA.US)$ - Algorithm layer: represented by big models, it has made rapid progress in technology but has not yet matured in business. $MicroStrategy(MSTR.US)$ These three American stocks companies are expected to become winners in the cryptocurrency craze.

What makes these three companies special? What are their advantages and risks? In this article, we will take a detailed look at each of them.

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Bitcoin is approaching historical highs! Which three bitcoin concept stocks are worth paying attention to? -2

Coinbase (COIN): The world's largest cryptocurrency exchange platform.

Coinbase is one of the world's largest cryptocurrency exchange platforms.

Its history can be traced back to 2012, with early platforms mainly focused on trading bitcoin. After more than ten years of development, Coinbase has become a leading exchange for buying and selling cryptocurrencies.

Initially, the platform mainly focused on bitcoin trading, but with the continuous development of the cryptocurrency market, Coinbase gradually expanded its business scope, including trading various digital currencies such as ethereum, Tether stablecoin, and others.

In the company's 2023 trading volume, bitcoin accounts for 34%, ethereum 20%, Tether stablecoin 11%, with the rest coming from other crypto assets.

However, like many cryptocurrency companies, Coinbase's performance is closely related to the cryptocurrency market. Fluctuations in bitcoin prices directly impact Coinbase's revenue performance. For example, a drop in bitcoin prices in 2022 led to a nearly 60% plunge in Coinbase's revenue.

Source: Futubull
Source: Futubull

Market analysis suggests that with the surge in bitcoin and ethereum prices, more retail investors may re-enter the market, thereby boosting the company's business.

According to Motley Fool analysts' predictions, from 2023 to 2026, Coinbase's revenue and EBITDA are expected to grow at a compound annual growth rate of 9%.

In the past year, Coinbase's stock price has surged by 153.49%. It's worth noting that ARK investment manager 'Cathie Wood' has recently increased her holdings of Coinbase stocks.

Hershey has always been a long-term supporter of blockchain and cryptocurrencies. She started buying Coinbase in 2021 and has been continuously adding to her position, making Coinbase one of her largest holdings. It was reported that since September 11th, Hershey has been consistently adding to her Coinbase stock, reaching a value of $2.2 million, accounting for 7.43% of her ARKF fund.

Bitcoin is approaching historical highs! Which three bitcoin concept stocks are worth paying attention to? -3

MARA Holdings (MARA): The world's largest mining company.

MARA Holdings is the world's largest pure bitcoin mining company. MARA mined 12,852 bitcoins in 2023, setting a new record, a 210% increase compared to 2022.

As of the end of 2023, the company still holds 15,126 bitcoins (worth approximately $0.947 billion) and $357 million in cash and equivalents.

The business model of mining companies is essentially energy arbitrage, with the core of using lower costs to mine more bitcoins.

This business model may be more challenging than that of exchanges. Mining companies need significant capital expenditures to purchase mining machines, and profitability is achieved by increasing the efficiency of mining bitcoins and the appreciation of bitcoins. Therefore, such companies generally have higher debt ratios, and fluctuations in bitcoin prices often significantly affect the profits and cash flow of mining companies.

From historical data, generally, when the price of bitcoin rises, the stock prices of mining companies may increase even more, as investors are unusually excited, believing in the existence of leverage. When the price of bitcoin falls, mining companies will be hit harder.

Analysts at Ark Invest believe that MARA's future growth potential may lie in the expansion of mining facilities and the increase in the price of bitcoin.

In the past year, MARA has opened two new factories and agreed to acquire several other mining sites, the expansion of the mining site may bring economies of scale, thus improving the efficiency of mining.

Motley Fool analysts predict that from 2023 to 2025, its revenue will grow at a compound annual growth rate of 48%, if the price of bitcoin continues to soar, and the company continues to expand its mining sites, its growth may be even faster.

From the perspective of stock performance, MARA is relatively underperforming among the three crypto concept stocks, but its stock price has also increased by 100.95% in the past year.

Bitcoin is approaching historical highs! Which three bitcoin concept stocks are worth paying attention to? -4

MicroStrategy (MSTR): one of the companies holding the most bitcoins among publicly traded companies.

MicroStrategy is an interesting company. Its main business actually has nothing to do with cryptocurrencies, but it is one of the largest holders of bitcoins among publicly traded companies globally.

MicroStrategy's main business is enterprise software, providing enterprise analytics software and services for decades. It has a solid customer base, including Hilton Worldwide and Sony.

To adapt to trends in the software industry, MSTR is migrating its enterprise analytics software customers to the cloud, which will shift revenue generation from product licensing to subscription. However, over the past five fiscal years, the company's revenue has not shown much improvement, hovering around around $0.5 billion.

Source: Futubull
Source: Futubull

Although MSTR's main business is growing slowly, the company has a more valuable asset, which is bitcoin. The reason is that the company's CEO, Michael Saylor, is a devoted bitcoin enthusiast, believing that bitcoin is digital gold and will become a global store of value in the future.

Therefore, in August 2020, he initiated a strategy to use the company's excess cash as well as debt and equity financing to continuously buy bitcoin in the long term.

As of September 2024, the company holds 0.252 million bitcoins, ranking first among global companies in terms of this holding.

Therefore, investors can consider MSTR as a company that provides stable revenue through its core SaaS software business and continues to buy bitcoin with low-cost funds, providing the company with upward potential.

However, this also ties the value of MSTR to the price of bitcoin. Once the price of bitcoin falls, the value of MSTR may plummet as well.

MicroStrategy's stock price has risen by 501.26% in the past year. The recent price has also reached a new all-time high, with a market cap of $40.86 billion (calculated as of the closing price on October 14, 2024). MSTR holds 0.252 million bitcoins, which, calculated at $68,000 per coin, is worth approximately close to $17.1 billion, meaning that the value of bitcoin represents almost half of the company's market cap.

Bitcoin is approaching historical highs! Which three bitcoin concept stocks are worth paying attention to? -5

Investing in the concept of crypto stocks involves risks

Investing in the concept of crypto stocks (meaning stocks of companies related to cryptocurrencies) may face the following three main risks:

  1. High volatility: The cryptocurrency market is extremely volatile, and prices may fluctuate significantly in a short period. This volatility can affect the stock prices of companies related to cryptocurrencies. Due to the uncertainty and speculation in the cryptocurrency market, the prices of concept stocks may be greatly impacted. Investors should consider this volatility and its potential impact on concept stocks.

  2. Regulatory Risks: The regulatory environment of the cryptos industry has been constantly changing, with governments around the world often changing their attitudes and regulations towards cryptos. Governments may introduce new regulations or policies that could have a negative impact on the operations of cryptos-related companies, thereby affecting their stock prices. Investors should closely monitor changes in the regulatory environment and assess the impact of these changes on the companies they have invested in.

  3. Technical and Security Risks: Cryptos companies typically rely on technological infrastructure to operate their businesses, including blockchain technology, cybersecurity measures, and more. However, these technologies may face various challenges such as cyber attacks, data breaches, smart contract vulnerabilities, and so on. If a company's technological infrastructure is compromised, it could lead to business interruptions or data breaches, thereby affecting its reputation and stock prices. Therefore, investors need to evaluate the technical capabilities and security measures of the companies they invest in and consider the impact of these factors on potential risks.

In general, investing in cryptos concept stocks carries higher risks, and investors should conduct thorough due diligence and carefully assess their investment objectives and risk tolerance.

Risk disclosure: This content does not constitute a research report, is for reference only, and should not be used as a basis for any investment decisions. The information involved in this article is not a comprehensive description of the securities, markets, or developments mentioned. Although the information source is considered reliable, the accuracy or completeness of the above content is not guaranteed. In addition, no guarantee is given for any statements, opinions, or forecasts provided in this article.

Disclaimer: The above content does not constitute any act of financial product marketing, investment offer, or financial advice. Before making any investment decision, investors should consider the risk factors related to investment products based on their own circumstances and consult professional investment advisors where necessary.

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