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

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

With the recovery of the market, investors began to pay attention again to stocks related to Digital Currency.

The so-called Digital Currency concept stocks refer to the stocks of publicly listed companies that are related to Digital Currency. These companies are usually associated with the Digital Currency ecosystem, engaging in areas such as Digital Currency mining, Trading platform, payment solutions, and blockchain technology development.

Their stock prices are usually influenced by the volatility of the Digital Currency market, so when Digital Currency performs well, these companies' stock prices may rise accordingly, and vice versa.

According to analysts from Motley Fool, $Coinbase(COIN.US)$ 、 $MARA Holdings(MARA.US)$ and $Strategy(MSTR.US)$ These three U.S. companies are expected to become winners amid the cryptocurrency boom.

What is special about these three companies? What are their advantages and risks? This article will take a closer look at each one:

Coinbase (COIN): The largest cryptocurrency trading platform in the world.

Coinbase is one of the largest cryptocurrency trading platforms in the world.

Its history can be traced back to 2012, when the platform initially focused mainly on Bitcoin trading. After more than a decade of development, Coinbase has become a leading exchange for buying and selling crypto assets.

Initially, the platform mainly concentrated on Bitcoin trading, but with the continuous development of the cryptocurrency market, Coinbase gradually expanded its business scope to include the trading of various digital currencies such as Ethereum and Tether stablecoin.

In the company's trading volume in 2023, Bitcoin accounted for 34%, Ethereum 20%, Tether stablecoin 11%, with the remainder coming from other crypto assets.

However, like many cryptocurrency companies, Coinbase's performance is closely tied to the cryptocurrency market. The fluctuations in Bitcoin's price directly impact Coinbase's revenue performance. For instance, in 2022, the drop in Bitcoin's price led to a nearly 60% plunge in Coinbase's revenue.

However, market analysis believes that with the surge in prices of Bitcoin and Ethereum, more retail investors may return to the market, thereby boosting the company's business.

According to forecasts by Motley Fool analysts, 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 increased by 153.49%. Notably, ARK Invest manager "Cathie Wood" has also been increasing her position in Coinbase stock recently.

Cathie Wood has been a long-term advocate for blockchain and cryptos. She began buying Coinbase in 2021 and has continued to increase her position, making it one of her largest holdings. Reports indicate that since September 11, she has been steadily boosting her Coinbase stock, worth 2.2 million dollars, which accounts for 7.43% of her ARKF fund.

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

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

As of the end of 2023, the company still holds 15,126 Bitcoins (valued at approximately 0.947 billion USD) and 357 million USD in cash and cash equivalents.

The business model of mining companies is essentially energy arbitrage, focused on mining more Bitcoin at a lower cost.

This business model may be more challenging than the business model of Exchanges. Mining companies require significant capital expenditure to purchase mining machines, and their profit comes from increasing the efficiency of Bitcoin mining and the appreciation of Bitcoin. Therefore, such companies generally have a higher debt ratio, and fluctuations in Bitcoin prices often severely affect the profits and cash flow of mining enterprises.

Historically, when Bitcoin prices rise, mining company stock prices may rise even more because investor sentiment is extremely excited, believing there is a leverage effect; whereas when Bitcoin prices fall, miners face greater losses.

Analysts at Motley Fool believe that MARA's future growth points may lie in the expansion of mining sites and the rise of Bitcoin prices.

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

Analysts at Motley Fool predict that from 2023 to 2025, its revenue will grow at a compound annual growth rate of 48%, and if Bitcoin prices continue to soar and the company keeps expanding its mining sites, its growth may be even faster.

In terms of stock performance, MARA is one of the three Cryptocurrency Concept stocks that has performed relatively poorly, but its stock price has still risen by 100.95% over the past year.

MicroStrategy (MSTR): one of the publicly traded companies with the largest holdings of Bitcoin.

MicroStrategy is quite an interesting company; its main business is actually not related to digital currency, yet it is one of the largest publicly traded holders of Bitcoin in the world.

MicroStrategy's main business is enterprise software, providing enterprise analytics software and services for decades. It has a solid client 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-based revenue. However, in the past five fiscal years, the company's revenue has not seen much improvement, hovering around $0.5 billion.

Although MSTR's main business is growing slowly, the company holds more valuable assets, which are Bitcoin. The reason is that the company's CEO, Michael Saylor, is a loyal enthusiast of Bitcoin, believing that Bitcoin is digital Gold and will someday become a global store of value.

Therefore, in August 2020, he initiated a strategy to leverage the company's excess cash along with debt and equity financing to buy Bitcoin long-term and continuously.

As of September 2024, the company holds 0.252 million Bitcoins, making it the largest holder among global companies.

Therefore, investors can consider MSTR as a company that provides a stable revenue stream through its core Saas software Business and continuously buys Bitcoin with low-cost funds, which offers it upside potential.

However, this also ties the value of MSTR highly to Bitcoin; once the price of Bitcoin drops, the value of MSTR may also plummet significantly.

MicroStrategy's stock price has increased by 501.26% over the past year. Recently, the stock price also set a historical high, with a Market Cap reaching 40.86 billion dollars (calculated at the closing price on October 14, 2024). MSTR holds 0.252 million Bitcoins, which at a price of 68,000 dollars each is approximately close to 17.1 billion dollars in value, meaning that the value of Bitcoin accounts for almost half of the company's Market Cap.

Risks of Investing in Cryptocurrency Concept Stocks

Investing in Cryptocurrency concept stocks (i.e., company stocks related to cryptocurrencies) may face the following three main risks:

1. High Volatility: The cryptocurrency market is extremely volatile, and prices can fluctuate significantly within a short time. This volatility affects the stock prices of companies related to cryptocurrencies. Due to the uncertainty and speculative sentiment in the cryptocurrency market, the prices of concept stocks may be subject to extreme influences. Investors should consider this volatility and its potential impact on concept stocks.

2. Regulatory Risk: The regulatory environment in the cryptocurrency industry has been changing; governments across countries often change their attitudes and regulations towards cryptocurrencies. Governments may introduce new regulations or policies that could negatively impact the operations of cryptocurrency-related businesses, thereby affecting their stock prices. Investors should closely monitor changes in the regulatory environment and assess their impacts on the companies they invest in.

3. Technical and security risks: Cryptocurrency companies often rely on technological infrastructure to operate their business, including blockchain technology, cybersecurity measures, and more. However, these technologies may face various challenges, including cyberattacks, data breaches, and vulnerabilities in smart contracts. If a company's technological infrastructure is compromised, it may lead to business interruptions or data breaches, affecting its reputation and stock price. Therefore, investors need to assess the technological capabilities and security measures of the companies they invest in and consider the impact of these factors on potential risks.

In general, investing in cryptocurrency concept stocks carries higher risks, and investors should conduct thorough due diligence and cautiously 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 the basis for any investment decision. The information contained herein is not a comprehensive description of the securities, markets, or developments mentioned. Although the sources of information are considered reliable, the accuracy or completeness of the above content is not guaranteed. Furthermore, there is no guarantee regarding the accuracy of any statements, viewpoints, or forecasts provided in this article.