The price of Bitcoin has largely rallied over the past month. 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 solely on IBD’s chart analysis, the best crypto stocks and Bitcoin stocks to buy or watch include Coinbase (COIN), MicroStrategy (MSTR), ProShares Bitcoin Strategy (BITO), a Bitcoin futures ETF, Bitfarms (BITF) and Riot Blockchain (RIOT).
But investors should take caution. Those stocks live and die by Bitcoin price gyrations. Some have troubled pasts.
Fluctuations In Bitcoin, Bitcoin Stocks
The price of Bitcoin currently stands at around $60,000, well up from 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 — have become more popular. But their moves higher or lower can happen at any time and without any reason.
Still, the industry has made progress toward mainstream adoption. More exchange traded funds tied to Bitcoin futures and companies — the closest things to a direct Bitcoin ETF — have debuted recently. Major corporations are taking interest.
ProShares Bitcoin Strategy ETF (BITO) began trading on the NYSE Arca last month. That launch helped drive Bitcoin to a record high. The Valkyrie Bitcoin Strategy ETF (BTF) made its trading debut shortly after. VanEck has launched its VanEck Bitcoin Strategy ETF on CBOE. Those funds offer exposure to Bitcoin futures.
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 also 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, 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 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 (GBTC) 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 (SI) is known as a “crypto bank” and runs a digital-currency exchange platform. Coinbase is a leading Bitcoin and cryptocurrency exchange, and makes money from fees on transactions. But the companies’ stock prices are still significantly affected by the day-to-day fluctuations of Bitcoin and other crypto prices.
The exchange recently reported quarterly results that missed expectations.
Coinbase stock began trading on April 14. COIN stock fell almost immediately, tumbling from an opening day high of 429.74 to 208 on May 19.
But after swinging near lows 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.
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 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.
Shares of the business-analytics software company — a survivor of the dot-com bust — have a 79 Composite Rating. The stock’s EPS Rating is 45.
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-related 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 October, said it held over 114,000 Bitcoins. Not surprisingly, the swings in Bitcoin price have a huge impact on MSTR stock and its earnings.
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.
The company lost $3.61 per share during the third quarter, compared to estimates for a per-share profit of 64 cents. Revenue beat expectations.
Some analysts have warned that MicroStrategy’s dive into Bitcoin could take away focus from its core analytics business. Other 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.
ProShares Bitcoin Strategy
The ProShares Bitcoin Strategy ETF began trading last month. 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.
Bitfarms, a Bitcoin miner, is well extended from a consolidation with a 7.57 entry.
The stock has an 83 Composite Rating. Its EPS Rating is 19. The company reported third-quarter earnings on Monday that missed estimates.
Riot Blockchain, another crypto miner, fell after the company reported third-quarter results that missed expectations. The move lower erased a breakout and put the stock back below a 40.90 buy point of a cup base.
Still, the stock, like some of the other Bitcoin stocks here, has a 96 Composite Rating. Its EPS Rating is 68.
Riot Blockchain, which had a previous life as a biotech company, had eight full-time employees as of March 25. Riot has focused on mining and brought in new leadership, after its onetime CEO left following market-manipulation charges from the SEC that related to other companies.
In that case, which was unrelated to Riot Blockchain, former CEO John O’Rourke and others last year agreed to settle with the SEC over allegations, brought in 2018, of what the agency called “classic pump-and-dump schemes.“
One of Riot’s big investors also settled with the SEC in relation to that case. Other aspects of Riot’s past have raised questions.
YOU MAY ALSO LIKE: