Hot Stuff: The 3 Best Opportunities for Investing in Crypto
There are some crypto stocks for investors to take advantage of this year. My thesis is AI and tech stocks had their moment in the sun last year, and this year will be remembered for Bitcoin’s (BTC-USD) historic rise.
There are some advantages for investors buying these crypto stocks over holding coins directly. That includes greater regulatory compliance, potential upside from business growth beyond just crypto prices and the ability to hold them in tax-advantaged accounts.
Furthermore, I believe holding crypto stocks is a kind of synthetic leverage which may amplify potential gains and losses. The reason is that the revenues and profits of many crypto companies are directly tied to crypto prices and trading volumes. As such, their stocks tend to be highly sensitive to movements in underlying crypto assets like Bitcoin.
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The book value of crypto stocks may rise and fall with the broader market and also diversify their earnings from other sources, which could deliver better overall returns than just by holding cryptocurrencies.
So, here are three crypto stocks for investors to take advantage of.
Riot Platforms (RIOT)
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Riot Platforms (NASDAQ:RIOT), a U.S.-based Bitcoin mining company, plans to significantly expand its mining capacity this year. It’s one of my top picks for investors interested in scooping up shares of a hot crypto stock.
In terms of technology and equipment, RIOT has entered into multiple purchase agreements for Bitcoin miners. An initial order with MicroBT included 33,280 immersion miners for the Corsicana Facility, followed by a second order for an additional 66,560 miners and a third order for 31,500 air-cooled miners for the Rockdale Facility. Once fully deployed, RIOT anticipates achieving a self-mining hash rate capacity of 41 EH/s.
Financially, RIOT is in a strong position with $908 million in cash and equivalents, including Bitcoin holdings, and no debt.
I think that despite the Bitcoin halving event cutting into Riot’s profits, the increased awareness and hype around the coin will send RIOT’s valuation soaring, making it one of those crypto stocks for investors to consider.
Interactive Brokers Group (IBKR)
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Interactive Brokers Group (NASDAQ:IBKR) enables trading across various asset classes, including crypto.
I think IBKR could be one of those crypto stocks that is a slightly underappreciated pick relative to other companies in the market. For instance, the company reported a net interest income of $730 million for the previous quarter and a record $2.8 billion for 2023. IBKR’s total assets increased to $128 billion by the end of 2023, a 12% rise from the previous year.
Analysts have a positive outlook on IBKR, with 9 Wall Street research analysts recommending a Buy or Strong Buy rating for the stock. There’s a modest upside predicted for IBKR, but I believe with the crypto surge in full swing, it will report huge earnings for this segment.
IBKR has a ubiquitous presence online thanks to it targeting primarily wealthy traders and investors, and its fees are more competitive than many of its peer companies, with commissions ranging from 0.12% to 0.18% of trade value, which is competitive compared to other platforms that might charge higher fees or add spreads or markups.
I expect a surge of trading activity for IBKR on its platform, which makes it one of those crypto stocks to consider.
Coinbase Global (COIN)
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Coinbase Global (NASDAQ:COIN) plays a pivotal role in the crypto market. Its stock surged over 48% year-to-date amid the Bitcoin ETF approval in Q1, and there could be more in store for investors as well.
In the past, an analyst on Seeking Alpha noted that COIN has demonstrated a tendency to move in tandem with Bitcoin, showcasing a “beta” to Bitcoin of approximately 1.2x in 2023. That correlation indicates a 1% change in Bitcoin’s value could lead to around a 1.2% change in COIN’s stock price.
If this historical correlation holds up, COIN could surge to new heights. Forecasts suggest a bullish trend for Bitcoin, with prices expected to reach near $80,000 by April.
If Bitcoin ends up going on its predicted historical rally, COIN could be one of the primary beneficiaries due to increased earnings from trading fees. That positions it as one of those crypto stocks to buy.
On the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.
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