Of late, leading crypto-related stocks have been performing exceptionally well, which can be mainly attributed to the favorable regulatory environment and the growing acceptance of virtual currencies across markets. However, the crypto-economy is still at a nascent stage and is expected to grow at a compound annual rate of 12.8% through 2030.
Bitcoin, the largest cryptocurrency, made strong gains after entering an upward spiral a few months ago and once again breached the $60,000 mark, gaining about 28% in the past thirty days. Among others, Ethereum hovered near $3,750 early Monday, after rising consistently in the previous sessions.
Coinbase
Investors have responded positively to the ongoing boom and crypto stocks, in general, got a big boost. Coinbase Global, Inc. (NASDAQ: COIN), the first dedicated cryptocurrency company to have entered the US stock market, played a key role in increasing the legitimacy of cryptos. Since the company offers a regulated platform for cryptocurrency trading, its market debut helped ease the skepticism over digital currencies.
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Recently, there were reports that the Securities and Exchange Commission gave the green signals for bitcoin futures exchange-traded funds to start trading in stock markets in the U.S. It is worth noting that the SEC had rejected a bid to create a bitcoin ETF a few years ago.
The latest move would be a major milestone for the crypto industry that has long been trying to become a part of the mainstream market. It is expected that the first bitcoin futures ETF would debut on the New York Stock Exchange this week. It also explains the rush of new entrants into the crypto market.
Earlier, Coinbase had experienced weakness after the stock entered a volatile phase, but it regained strength this month. Encouragingly, experts believe there is more room for the stock to grow – up to 20% in the next twelve months. The stock maintained the uptrend on Monday afternoon and traded at the highest level in more than five months.
Unveiling its first financial report as a public entity, Coinbase recently said its second-quarter revenues and earnings increased multifold to $2.2 billion and $6.42 per share, respectively, reflecting strong user growth and trading volume. The management cautioned it might not be sustained in the current quarter due to a potential dip in volumes.
Meanwhile, the company needs to make focused investments in the business to stay relevant in the rapidly evolving crypto landscape, especially in areas like decentralized finance.
Nvidia
Unlike Coinbase, chipmaker Nvidia Corporation (NASDAQ: NVDA) is not directly involved in crypto trading by is exploring a new revenue stream by building microprocessors exclusively designed for cryptocurrency mining. The company’s gaming chips have been widely used for crypto mining, often leading to shortages. NVDA, which has been a favorite among investors for a long time, gained about 66% this year alone and became one of the fastest-growing stocks.
The stock has been growing steadily since early last year after the pandemic-driven shift to remote work. That, combined with a spike in the consumption of gaming content, drove up chip demand. Nvidia’s GPUs are also widely used in emerging areas like machine learning and artificial intelligence.
The company has reported strong earnings and revenue growth over the past several years, with the numbers beating analysts’ forecasts each time. In the second quarter, net profit surged 89% to $1.04 per share, aided by broad-based revenue growth across all business segments. The gaming division continued to be the main growth driver.
Despite the rally, Nvidia’s stock looks fairly valued and offers an investment opportunity that is worth considering. Market watchers have assigned strong buy rating on the stock, citing the bullish growth forecast for the 12-month period. NVDA was trading up 1.30% in the early hours of Monday.
MicroStrategy
MicroStrategy, Inc. (NASDAQ: MSTR), a pioneer in the development of enterprise software for business intelligence and analytics, has a strong crypto portfolio with bitcoin holdings worth more than $3 billion. Due to its aggressive bets on cryptocurrency, the tech firm’s stock is often influenced by fluctuations in the value of bitcoin.
MicroStrategy’s CEO Michael Saylor being an avid bitcoin advocate, the crypto holdings are likely to grow further going forward. The company’s strategies for funding its bitcoin program also include stock sales and debt offerings. Due to the large crypto holding – which is probably unmatched – the company assumes a unique position among its Wall Street peers. The unique strategy seems to have worked for the stock, which is performing well these days.
Legitimacy, lower risk make stocks better investments than cryptos
MSTR had been keeping a low profile since hitting a peak more than a decade ago, until a year ago when it shifted to rally mode and reached a 10-year high, after registering a four-fold growth in less than five months. Interestingly, the rebound started soon after the company announced its first bitcoin deal. The shares closed the last trading session slightly below $750 but well above the 52-week average. They have gained 29% since last month.
Meanwhile, there are concerns that the company’s crypto push might be distracting it from the core business — something investors wouldn’t be happy about.
It is important to note that Bitcoin and other cryptocurrencies experienced a major slump before returning to the growth path, and that is likely to happen again. Such fluctuations make crypto-related stocks riskier than traditional equities that are better regulated and considered more legitimate.