Intro
If we compare Bitcoin (BTC) quotes with stocks from various sectors, there is an obvious correlation. Fintech Block, Coinbase crypto exchange, Riot Blockchain mining company, and others directly correlate with the price of the main cryptocurrency. With the growth of Bitcoin prices, the quotations of the companies in question also grow in a similar way. A new reality is coming. We are tracking Bitcoin not only as an investment asset but also as a price-forming block for the stock market. And if a couple of years ago no more than ten such companies were trading, now more than 30 crypto-dependent tools can be confidently counted. If we add companies implementing blockchain and payment methods with cryptocurrencies to this list, you will get more than 100 brands.
Thus, it is not necessary to invest in tokens to receive income from cryptocurrencies. Participants of the crypto market can invest money in stocks of companies related to cryptocurrency. However, before investing in stocks, it is worth analyzing companies. In this article, we will give some examples of crypto stocks that can diversify your portfolio.
Coinbase (COIN)
This is an American cryptocurrency exchange whose shares have been publicly traded since April 2021. In April 2022, Coinbase Global announced a direct listing of its own shares on NASDAQ.
The exchange earns fees from transactions with cryptocurrencies. The more popular and volatile cryptocurrencies are, the better for business.
Speaking about the profitability of such an investment, it is necessary to track the current situation. COIN stocks updated a historical low (reaching $40.61 per share) on November 21 amid news of the collapse of the FTX exchange. Given these events, Bank of America lowered the recommendation on the crypto exchange from “buy” to “neutral”.
However, this does not mean investors should be afraid to invest in COIN. This company has a high level of reliability and will soon be able to offset the consequences of FTX’s bankruptcy.
Riot Blockchain (RIOT) & Marathon Digital (MARA) & CleanSpark (CLSK)
These are companies that mine cryptocurrency, most often Bitcoin. Usually, such companies own cryptocurrency for large sums. The more expensive Bitcoin is, the more expensive the companies’ assets are and the more profitable it is to mine cryptocurrency. The two most potentially profitable are Riot Blockchain and CleanSpark. Given the current crypto winter, the shares of Bitcoin mining companies have also fallen, which allows you to find profitable entry points.
Taking into account historical data (for 2022), we can draw the following conclusions: RIOT shares turned out to be the most profitable in 2022, followed by CLSK, and MARA shares were the least profitable.
Moreover, RIOT has the highest hashrate among the companies under consideration. Even though MARA promises to significantly increase the hashrate, at the moment, their statements do not look entirely realistic.
Advanced Micro Devices (AMD) & Nvidia (NVDA)
AMD and Nvidia processors are used in Bitcoin mining farms. Currently, these two companies are the main manufacturers of graphics devices for mining. Fundamentally, NVIDIA looks more attractive than AMD because it has been steadily generating positive free cash flow (FCF) since 2010, unlike AMD, which entered a positive FCF only in 2021.
In addition, at the end of 2022 — the beginning of 2023, Nvidia video cards hold a confident leadership. Nvidia RTX 3000 series video cards have taken the lead both in terms of gaming performance and profitability in mining. Therefore, investing in NVDA stocks seems to be a more profitable venture.
Grayscale Bitcoin Trust (GBTC) & Purpose Bitcoin ETF (BTCC) & CI Galaxy Bitcoin
There is a Grayscale Bitcoin Trust fund in the USA that has been operating since 2013. Grayscale Bitcoin Trust is one of the tools that is pegged to the price of Bitcoin (and other digital coins). The company attracts investors’ money, with which it buys cryptocurrency. The purchased coins are stored using Coinbase Custody, whose activities are regulated by the New York State Department of Financial Services (NYDFS). Shares of the crypto fund are being issued. Investors purchase securities in the over-the-counter OTCQX system. To date, the fund’s AUM is $10,832,714,497 in BTC. However, the GBTC price has often deviated from fair.
ETFs like BTCC and BTCX better track the price of Bitcoin. However, they appeared only in 2021, and it is too early to judge. Also, the BITO ETF, based on Bitcoin futures, was recently launched in the USA. The fees of these funds are lower than that of GBTC.
PayPal (PYPL) & Block (SQ)
The demand for cash is falling, and digital payments are becoming increasingly popular. Who benefits from this? Naturally, fintech companies. The two most popular of them are PayPal and Block. These companies are known for their peer-to-peer money transfer applications — Venmo (PayPal) and Cash App (Block). Both applications support cryptocurrency transactions and allow users to buy, sell, and transfer digital assets, but there are nuances. While Venmo supports Bitcoin, Litecoin, Bitcoin Cash, and Ethereum, the Cash App supports only Bitcoin. On the other hand, the developers of the application promise to add support for other cryptocurrencies, which can boost the price of SQ.
The Block is focused on expanding business lines. The company declares its intentions to launch a decentralized crypto exchange, finalize the Lightning Network, and launch a hardware wallet, as well as a Bitcoin mining device. Thus, choosing between PYPL and SQ shares, we can conclude that SQ is more potentially profitable and risky, and PYPL is more reliable.