The price of Bitcoin keeps rising. A number of Bitcoin stocks — or companies that have business tied to the cryptocurrency — have followed suit. But given the on-a-whim price swings in the crypto world, finding the best stocks out of that bunch can be difficult.
For now, based on IBD’s analysis, the best crypto stocks and Bitcoin stocks to buy or watch include Silvergate Capital Corp. (SI), Coinbase (COIN), MicroStrategy (MSTR), Marathon Digital (MARA) and ProShares Bitcoin Strategy (BITO), a Bitcoin futures ETF.
But investors should take caution. Those stocks live and die by the Bitcoin price gyrations. Some have troubled pasts.
Fluctuations In Bitcoin, Bitcoin Stocks
The price of Bitcoin currently stands at around $63,000. That’s modestly below the last month’s record high of $66,974.77 but more than double where it stood at the end of 2020.
Bitcoin got there after taking multiple hits this year: A crypto crackdown in China; Tesla backing away from using the currency; fears of tighter regulations in the U.S.
Meanwhile, cheaper coins — including meme-based cryptocurrencies Dogecoin and Shiba Inu coin — have become more popular. But their moves higher or lower can happen at any time, and sometimes without any reason.
Still, the industry has made progress toward mainstream adoption. More exchange traded funds tied to Bitcoin futures have debuted recently. Major corporations are taking interest.
ProShares Bitcoin Strategy ETF BITO began trading on the NYSE Arca last month, with that launch helping to drive Bitcoin to record high. The Valkyrie Bitcoin Strategy ETF (BTF) made its trading debut shortly after.
Among other Bitcoin-related ETFs, Invesco Alerian Galaxy Crypto Economy ETF (SATO), made up of shares of companies engaged in crypto-related activity, also debuted in October. So did the Volt Crypto Industry Revolution and Tech ETF (BTCR), which also gives investors access to Bitcoin-exposed companies.
More companies — from Mastercard (MA) to Bank of New York Mellon (BK) — are offering services related to digital assets. Coinbase is working with Meta Platforms (FB)-unit platform Facebook to provide storage and security services for a test of Facebook’s digital wallet.
But the way Bitcoin and cryptocurrencies are used now — largely for investing — is a big departure from Bitcoin’s original intent as a currency, free from central banks, that people could use to buy things.
Observers also still raise concerns about security, market manipulation, short-term efforts to make a quick buck, and whether cryptocurrencies, and by extension Bitcoin stocks, have a place in mainstream investing. More regulation could hasten adoption. But it could dampen some of the big gains that have made Bitcoin popular.
Bitcoin stocks are not all the same.
Some, such as MARA stock or Riot Blockchain (RIOT), are in the business of mining Bitcoin. Some, like MicroStrategy, simply buy Bitcoin, giving investors a way to play the cryptocurrency on the major exchanges. The rise of Bitcoin ETFs may make such companies that buy Bitcoin less appealing. Grayscale Bitcoin Trust has filed to transition into a spot Bitcoin ETF.
Bitcoin miners and buyers are directly tied to Bitcoin and the cryptocurrencies they hold.
Other Bitcoin stocks serve as cryptocurrency’s financial plumbing. Silvergate Capital is known as a “crypto bank” and also runs a digital-currency exchange platform. Coinbase is a leading Bitcoin and cryptocurrency exchange. They generally generate income from various fees, but their stock prices are still significantly affected by the day-to-day fluctuations of Bitcoin and other crypto prices.
Silvergate Capital Stock
Silvergate Capital is the holding company for Silvergate Bank, which provides financial services for digital currencies that try to keep up with the 24/7 pace of cryptocurrency trading. Shares jumped 21% on Monday, an advance others attributed to a Morgan Stanley note that pointed out the stock moved in tandem with Bitcoin.
SI stock blasted past a 175.09 cup-with-handle buy point Monday, and kept rising on Tuesday, well extended from the chase zone.
Among the Bitcoin stocks mentioned here, it’s the only one that has Composite and EPS ratings of 99.
Along with traditional commercial and residential lending services, Silvergate runs an exchange network that allows its digital-currency clients and institutional investors to send U.S. dollars to accounts of other Silvergate clients at any time. Its digital-currency customers include digital-currency exchanges and institutional investors.
The company earned 88 cents per share in the third quarter, a 138% gain, according to FactSet. The company said it had 1,305 digital currency customers at the end of the quarter, up around 7% from the number it had on June 30.
Coinbase stock began trading on April 14 via a direct listing. COIN stock fell almost immediately, tumbling from an opening day high of 429.74 to 208 on May 19. But after swinging near low for a few months, COIN stock surged past trend line entries and then out of a bottoming base in mid-October. The Bitcoin stock has continued to rise, extended from any buy point.
In August, Coinbase forecast lower trading volume and active users for the third quarter, following a drop in crypto prices and trading activity.
Coinbase draws revenue from transaction fees earned on cryptocurrency trades on its exchange. The company has said it wants to expand to become the “Amazon (AMZN)” of digital assets. But putting more of those assets on its platform could bring complications with compliance, and little known, less proven currencies that could pose bigger risks to investors.
Coinbase in September also said the SEC threatened to sue it if it launched a lending program allowing users to earn interest on some crypto assets. The company later halted that program.
MicroStrategy stock is buy range from a cup-with-handle base with a 777.17 buy point. MSTR stock broke out on Nov. 2. Shares of the business-analytics software company — a survivor of the dot-com bust — have an 86 Composite Rating. Its EPS Rating is 66.
However, the relative strength line for MSTR stock has been moving sideways for several months. MSTR stock used to trade at a huge premium to the Bitcoin assets it held, in part because it was a relatively easy way for ordinary investors to play Bitcoin. But with more and more Bitcoin stocks available, and the rise of Bitcoin ETFs, MicroStrategy may no longer be as compelling.
MicroStrategy last year said it had bought Bitcoin, with the intention of making the cryptocurrency its “primary treasury reserve asset.”
At that time, CEO Michael Saylor said Bitcoin would offer bigger rewards to investors than cash. And he said that a flood of stimulus money brought on by the coronavirus pandemic, along with other factors, would weigh on the value of traditional currencies.
MicroStrategy, in June, said it held over 105,000 Bitcoins, bought at an aggregate price of around $2.741 billion. Not surprisingly, the Bitcoin price has a huge impact on MSTR stock.
The decision to hold Bitcoin makes MicroStrategy both a software play and a crypto play. But the company has used debt to finance its Bitcoin purchases, and holding Bitcoin adds a lot of unpredictability to the company’s balance sheet quarter to quarter. And some analysts have warned that MicroStrategy’s dive into Bitcoin has taken focus away from its core analytics business.
Some critics have also pointed to other moments in MicroStrategy’s past.
In 2000, Saylor and other executives settled fraud charges with SEC — without admitting or denying wrongdoing — after the agency alleged MicroStrategy “materially overstated its revenues and earnings.” Other reports have raised questions about the company’s expenses in years past.
Marathon Digital Stock
MARA stock cleared a trend line and short consolidation in quick order in early-to-mid-October. Marathon stock cleared a six-month consolidation with a 56.58 handle buy point on Nov. 2.
Marathon Digital stock has an 85 Composite Rating. As with other Bitcoin stocks here, EPS Rating, at 20, is not great.
But the fundamentals are improving.
In August, the miner, buyer and holder of cryptocurrencies, reported second-quarter total revenue of $29.3 million. That was up 220% from the prior quarter. The company earned 21 cents per share.
As of March 12, Marathon Digital had three full-time employees. It was formed in Nevada in 2010.
Before its focus on cryptocurrencies, it was focused on the exploration of uranium and vanadium minerals, then real estate, then patents and patent rights. The pivot to crypto also raised questions among one prominent short-seller in 2017.
ProShares Bitcoin Strategy
The ProShares Bitcoin Strategy ETF began trading on Oct. 19. The BITO ETF does not have ratings from IBD.
The SEC has been reluctant to approve an ETF directly tied to the Bitcoin price’s twists and turns. But over the summer, SEC Chair Gary Gensler indicated that the agency could be more receptive to applications for ETFs tied to Bitcoin futures.
Still, the U.S. government has remained wary of Bitcoin’s volatility, energy consumption and its role in illicit financial activity.
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