On March 11, 2024, the price of Bitcoin hit a two-year high, surpassing $71,000, once again becoming the focus of the market.
Over the past two years, the cryptocurrency market has experienced sharp fluctuations, especially Bitcoin, whose price plunged 70% between 2021 and 2022.
However, as U.S. regulators approved the first batch of Bitcoin spot ETFs and market expectations of slowing Bitcoin supply growth increased, Bitcoin prices began to bounce back until recently hitting new highs again.
As the market recovered, investors began to refocus on cryptocurrency-related concept stocks.
The so-called cryptocurrency concept stocks refer to those stocks of listed companies related to cryptocurrencies. These companies are often associated with the cryptocurrency ecosystem, engaging in cryptocurrency mining, trading platforms, payment solutions, blockchain technology development, and more.
Their stock prices are often affected by fluctuations in the cryptocurrency market, so when cryptocurrencies perform well, the stock prices of these companies may rise and vice versa.
According to analysts at Motley Fool, Coinbase Global, Marathon Digital, and MicroStrategy are expected to be winners in the cryptocurrency boom. These three stocks have gained even more than Bitcoin itself over the past year.
Coinbase Global (COIN): The World's Largest Cryptocurrency Trading Platform
Coinbase is one of the largest cryptocurrency trading platforms in the world.
Its history dates back to 2012, when the early platform was mainly based on trading Bitcoin, and after more than a decade of development, Coinbase became the main exchange for buying and selling crypto assets.
Initially, the platform focused mainly on Bitcoin trading, but as the cryptocurrency market continues to evolve, Coinbase has gradually expanded its scope of business to include trading multiple digital currencies such as Ethereum, Teda stablecoin.
Of the company's 2023 trading volume, Bitcoin accounted for 34%, Ethereum 20%, and Teda stablecoin accounted for 11%, with the rest coming from other crypto assets.
However, like many cryptocurrency businesses, Coinbase's performance is correlated to the value of the cryptocurrency market. Bitcoin price volatility directly affects Coinbase's earnings performance. For example, the Bitcoin price drop in 2022 caused Coinbase's revenue to plummet by nearly 60%.
But market analysts believe that as Bitcoin and Ethereum prices soar, more retail investors may return to the market, boosting the company's business.
Coinbase's revenue and EBITDA will grow at a compound annual growth rate of 9% from 2023 to 2026, according to Motley Fool analysts.
Coinbase Global's share price is up more than 300% over the past year as Bitcoin's price rebounds. Recently, however, ARK investment manager “Ms. Wood” has been selling Coinbase shares.
Sister Wood has been a long-time supporter of blockchain and cryptocurrencies. She started buying Coinbase in 2021, after which she steadily increased, and Coinbase is already one of the largest holdings. However, ARK began to depreciate Coinbase in the fourth quarter of 2023, and continues in 2024, which requires special attention from investors.
Marathon Digital (MARA): The World's Largest Miner
Marathon Digital is the world's largest pure bitcoin mining company, and Marathon mined 12852 bitcoins in 2023, setting a new record with a 210% increase compared to 2022. Mining efficiency from
As of the end of 2023, the company still held 15,126 bitcoins (valued at approximately $9.47 billion) and $3.57 billion in cash and equivalents.
The business model of mining companies is essentially energy niche, at the core of which is to mine more Bitcoin for less cost.
This trading model may be a bit more challenging than the trading model of an exchange. Since mining companies need to spend a lot of capital to buy miners, the way to make a profit is by increasing the efficiency of Bitcoin mining as well as increasing the value of Bitcoin. As a result, such companies generally have high debt ratios, and bitcoin price fluctuations tend to seriously affect miners' profits and cash flow.
In general, from historical data, miner share prices may rise more when Bitcoin prices rise, as investors are unusually excited and believe that there is leverage; and miners are more hit when the price of Bitcoin falls.
Analysts at Motley Fool believe that MARA's future growth point may lie in the expansion of the mine field and the rise in the price of Bitcoin.
Over the past year, MARA has opened two new plants and agreed to acquire several other mining sites, and the expansion of the mine could have a scale-up effect, increasing the efficiency of mining.
Motley Fool analysts forecast that its revenue will grow at a compound annual growth rate of 48% from 2023 to 2025, and it may grow faster if Bitcoin's price continues to soar and the company continues to expand its mines.
OVER THE PAST YEAR, MARA'S SHARE PRICE HAS ALSO REBOUNDED AS BITCOIN'S PRICE HAS BOUNCED, RISING 250% OVER THE PAST YEAR. But it is worth noting that its share price has not risen or fallen since this year, the opposite of the Bitcoin share price trend.
MicroStrategy (MSTR): One of the listed companies with the most Bitcoin holdings
MicroStrategy is a relatively interesting company whose main business is not related to cryptocurrencies, but it is one of the largest holders of listed Bitcoin companies in the world.
MicroStrategy's primary business is enterprise software and has been providing enterprise analytics software and services for decades. It has a solid customer base, including Hilton Hotels and Sony, etc.
To adapt to the trends in the software industry, MSTR is migrating its enterprise analytics software customers to the cloud, which will make it possible to shift from generating revenue through product licensing to generating revenue through subscriptions. However, for the past five fiscal years, corporate earnings have not been so great, hovering around $5 million.
Although MSTR's main business is growing slowly, the company has a more valuable asset, namely Bitcoin. The reason is that the company's CEO Michael Saylor is a staunch Bitcoin enthusiast who believes that Bitcoin is digital gold and will be a means of storing value globally in the future.
So in August 2020, he launched a strategy to buy Bitcoin on a long-term, sustained basis using the company's excess cash and debt and equity financing.
As of the end of 2023, the company held 189,150 bitcoins, which ranks first among companies globally. In addition, MicroStrategy announced that it will continue to buy more Bitcoin in the future.
As such, investors can assume that MSTR is a company that offers stable revenue streams through its core SaaS software business and continues to buy Bitcoin with low-cost capital, which gives it room to move up.
However, this also makes the value of MSTR companies highly tied to Bitcoin. Once the price of Bitcoin falls, the value of MSTR companies may drop by a thousand.
The data shows that MicroStrategy's share price has risen 538% over the past year, with a market capitalization of $241.9 billion (estimated at closing price on March 8, 2024). At the end of 2023, MSTR held 189,150 bitcoins at a price of $68,680, which is approximately close to $130 billion, which is to say that the value of Bitcoin accounts for more than half of the company's market capitalization.
Risks of Investing in Cryptocurrency Concept Stocks
Investing in cryptocurrency concept stocks (i.e. shares of companies related to cryptocurrencies) can face the following three main risks:
HIGH VOLATILITY: THE CRYPTOCURRENCY MARKET IS EXTREMELY VOLATILE, WITH PRICES LIKELY TO FLUCTUATE GREATLY OVER A SHORT PERIOD OF TIME. This volatility affects the stock price of companies related to cryptocurrencies. The price of concept stocks can be extremely affected due to uncertainty and speculative sentiment in the cryptocurrency market. Investors should consider this volatility and its potential impact on concept stocks.
Regulatory Risks: The regulatory environment of the cryptocurrency industry is constantly changing, with the attitudes and legal practices of various governments towards cryptocurrencies. The government may come up with new regulations or policies that could negatively affect the operations of cryptocurrency-related businesses, affecting their share prices. Investors should pay close attention to changes in the regulatory environment and assess their impact on the company they invest in.
Technical and security risks: Cryptocurrency companies typically rely on technical infrastructure to run their business, including blockchain technology, cybersecurity measures, and more. However, these technologies can face various challenges, including cyber attacks, data leaks, smart contract vulnerabilities, and more. If a company's technical infrastructure is damaged, it can result in a business interruption or data leak, affecting its reputation and share price. Therefore, investors need to evaluate the technical capabilities and security measures of the investment company and consider the impact of these factors on potential risks.
All in all, investing in cryptocurrency concept stocks carries a high level of risk, and investors should do their due diligence and carefully evaluate their investment objectives and risk tolerance.
Risk Disclosure: This content does not constitute research reports and is for reference only and does not serve as a basis for any investment decisions. The information referred to in this article is not a comprehensive description of the securities, markets or developments described. Although the source of information is considered reliable, the accuracy or completeness of the above is not guaranteed. In addition, the accuracy of any statements, opinions or predictions made in this article is not guaranteed.
Courses not unlocked yet