Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and other cryptocurrencies continue to garner investors’ attention. And given the rallies we’ve seen in crypto, it’s absolutely no surprise that investors remain attracted to these shiny “new” investments.
Of course, Bitcoin and a few others aren’t necessarily new. But for many investors, they are now that they have better access to them.
For years, they’ve watched these volatile assets ebb and flow — ripping higher then plunging lower. It wasn’t as easy to buy Bitcoin as it is to buy a stock. And depending on the headlines, it didn’t seem as safe either.
Now, though, we have well-known brands and brokers offering direct sales of cryptocurrencies to investors. We also have well-known corporations in their respective industries taking large positions in Bitcoin as a form of their short-term holdings.
Overall, the momentum in crypto has been strong. But if other corporations get in on the mix, we could just be getting started. That said, let’s look at seven stocks with crypto exposure that investors should consider buying.
- Tesla (NASDAQ:TSLA)
- PayPal (NASDAQ:PYPL)
- Square (NYSE:SQ)
- MicroStrategy (NASDAQ:MSTR)
- Riot Blockchain (NASDAQ:RIOT)
- Marathon Digital (NASDAQ:MARA)
- Grayscale Bitcoin Trust (OTCMKTS:GBTC)
Now, let’s dive in and take a closer look at each one.
Stocks With Crypto Exposure: Tesla (TSLA)
One of growth investors’ favorite stocks out there is Tesla. After its meteoric rise and with CEO Elon Musk’s praise for cryptocurrencies like Dogecoin (CCC:DOGE-USD), it should come as little surprise that the company has exposure to Bitcoin.
When I say exposure, I’m talking about some big size.
At the end of the year, Tesla had more than $19 billion in cash and short-term securities. Gone are the days that the automaker is on the brink of a liquidity crisis. It has so much liquidity now that it could afford to drop $1.5 billion on Bitcoin.
Furthermore, the company plans to accept payments from its customers via Bitcoin, so it’s not solely an investment in the crypto. It’s also a way to bolster its liquidity for when these payments begin taking place.
Additionally, one analyst has already estimated that Tesla has made $1 billion on its investment in Bitcoin — bolstering that liquidity even more.
Despite the momentum in both Bitcoin and Tesla, the share price of the latter recently suffered a peak-to-trough decline of 36% and remains 23% below its all-time high.
Acting as a digital wallet, it was only a matter of time before PayPal got involved in crypto. Near the end of 2020, the company added crypto to its services, allowing its users to buy and sell Bitcoin, Bitcoin Cash (CCC:BCH-USD), Ethereum and Litecoin (CCC:LITE-USD).
The company plans to extend that access to its Venmo users. Eventually, both will likely support sending cryptocurrencies to friends and family and allowing payments to be made in crypto as well.
PayPal isn’t stopping there, though.
It has already invested in blockchain and crypto-related companies like TaxBit and Cambridge Blockchain. It also recently acquired Curv, a crypto security firm.
So, given the acceleration in e-commerce and digital currencies, it only made sense for one of the largest companies in the space to adopt cryptocurrency. And look for that to be a driving force in the company’s future growth plans, too.
Stocks With Crypto Exposure: Square (SQ)
We can’t talk about PayPal’s crypto plans without talking about Square. The company has made a bigger push into Bitcoin than many of its peers — PayPal included.
First, the company’s Cash App makes it easy to buy and sell Bitcoin. The app even allows investors to set up recurring purchases of Bitcoin. This makes for an easy way to gain continual exposure to the crypto space. Moreover, the addition of Bitcoin has helped accelerate the growth rate for Cash App — and thus, Square.
In the most recent quarter, Bitcoin revenue of $1.76 billion exploded from $177.6 million in the same quarter a year ago. Furthermore, gross profit from Bitcoin came in at $41 million — up 13-fold year-over-year.
Additionally, Square isn’t relying on just Cash App to drive its exposure to Bitcoin. The company is taking direct exposure as well.
In October, the company scooped up 4,709 Bitcoins. It added another 3,318 in the following quarter. With almost $500 million worth of Bitcoin, Square has some serious exposure. At roughly 5% of its total assets now, will the company consider adding to its position? Perhaps it may consider another cryptocurrency alongside it.
If we want to talk about Bitcoin exposure, we can look past Tesla, Square and others. Why? Because the company that’s putting down some serious cheddar in the space is MicroStrategy.
The stock recently suffered a peak-to-trough decline of 40%. However, it’s still up massively. From the first trading session in November to its high in February, MicroStrategy stock rallied almost 700%. Despite the recent decline, shares are still up almost 350% from Nov. 2.
In any regard, what’s its role with Bitcoin?
In August 2020, the company scooped up $200 million worth of Bitcoin. Then another $50 million in December, followed a few days later by a slug of $400 million. By now, the company was running out funds to invest in Bitcoin and turned to raising capital to buy more.
In all, MicroStrategy owns more than $5 billion worth of the cryptocurrency. It now owns more than 91,000 coins with an average price of around $24,200. With $2.2 billion invested in Bitcoin, the company has about $3 billion in paper profit.
Therefore, should Bitcoin continue its march higher, so too should MicroStrategy.
Stocks With Crypto Exposure: Riot Blockchain (RIOT)
Shifting a bit from companies that are buying Bitcoin, what about the companies that are mining it? Introducing Riot Blockchain.
After all, Bitcoin and other crypto has to come from somewhere. These coins don’t just materialize out of thin air.
Instead, complex algorithms that are time and energy hungry churn out of the coins. At one point, miners worried about the cost of doing business. Specifically, that the cost and effort it took to mine Bitcoin — seriously, it takes a powerful system and plenty of energy — wasn’t worth the cost.
In other words, it cost more to mine a single Bitcoin than it was worth on the open market. That’s obviously not the case anymore with Bitcoin prices near all-time highs. In the company’s own words, it:
“Focuses on bitcoin mining, supporting the bitcoin blockchain by participating in Bitcoin’s consensus system through proof-of-work mining, racing to find the next block and building upon the chain.
We aim to be one of the largest and lowest-cost producers of bitcoin in North America.”
It’s no wonder shares are up more than 1,800% in the last six months and more than 400% in the last three. That’s despite enduring about a 50% decline from the highs in Q1 2021.
Marathon Digital (MARA)
Another name investors should know? Marathon Digital.
While Riot has done quite well over the past three and six months, Marathon has done great too. Shares are up nearly 250% in the past three months and more than 2,000% in the past six months.
No matter how you cut it though, both stocks are doing quite well.
Obviously these names are not as well known as Tesla or Square. However, investors looking to invest in crypto stocks should not ignore these names. They offer excellent ways to diverse from direct crypto exposure (such as owning Bitcoin or Ethereum). Further, they can be purchased in regular brokerage accounts.
Headquartered in Las Vegas, Marathon Digital is also a crypto mining firm.
In the most recent quarter, revenue exploded 854%. For the year, the company saw a 268% increase in revenue. During the quarter, the company “purchased 90,000 of the industry’s most efficient Bitcoin miners during the fourth quarter.” It also holds $216.1 million in cash and equivalents vs. just $1.5 million in current liabilities.
While its valuation is high, the company clearly has momentum.
Stocks With Crypto Exposure: Grayscale Bitcoin Trust (GBTC)
Obviously to gain the most direct exposure to cryptocurrencies would be to actually buy a crypto — like Bitcoin or Ethereum.
But for some investors, they’re just not there yet. Maybe it’s the idea of not understanding cryptocurrencies that well. Or perhaps it’s a trust issue with opening a crypto account or buying it in PayPal or Square’s Cash App.
For the more traditional investors who want exposure, they can consider Grayscale Bitcoin Trust, which buys directly in Bitcoin. In that sense, Grayscale acts like a fund — such as for gold or oil — that allows investors to gain exposure to these assets or commodities without directly buying them or the futures.
With that said, Grayscale is also quite volatile, which is not surprising given its underlying asset. Further, investors will pay a premium relative to the price of Bitcoin if they buy GBTC.
It may not be the most ideal way to gain exposure. But again, like gold for example, the best way to gain exposure would be to buy a hundred ounces or more. Otherwise, we are paying a higher premium and have additional headaches (such as logistics and storage).
For some investors, buying into a holding like Grayscale is simply an easier way.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.