- Each of these four crypto stocks to buy offers a unique way to indirectly invest in crpyto’s sell-off.
- Coinbase (COIN): Growth in institutional and retail clients and more listed assets and ample cash for organic and acquisition driven growth.
- Riot Blockchain (RIOT): With additional mining capacity, revenue and EBITDA are likely to surge, along with a strong balance sheet with cash and growing digital assets.
- Hut 8 Mining (HUT): Another Bitcoin (BTC-USD) miner with visibility for revenue and EBITDA growth that’s undervalued considering the growth outlook and digital assets on the balance sheet.
- Block (SQ): Cash App remains the game-changer with sustained growth in Bitcoin transactions using the app.
There has been a global market sell-off in risky asset classes. Within the umbrella of risky assets, cryptocurrencies, without doubt, have the highest volatility. It’s not a surprise that cryptocurrencies and crypto stocks have plunged in the recent past.
I believe that global liquidity tightening is the biggest fear for asset markets. The recent rate hike might just be the beginning of the tightening cycle as the central bank focuses on curbing inflation.
While there are medium-term headwinds, I remain bullish on the outlook for cryptocurrencies in the long-term. The U.S. has already indicated that it is hoping for responsible innovation from the crypto world. A ban seems unlikely.
Once the headwinds of inflation and potential recession are navigated, the asset class is likely to bounce back. Besides direct exposure to cryptocurrencies, investors can look at deeply oversold crypto stocks.
This column discusses four crypto stocks that can have a significant rally once sentiments turn bullish for Bitcoin (BTC-USD).
|HUT||Hut 8 Mining||$2.88|
Coinbase (NASDAQ:COIN) stock has plunged by 79% in the last six months. With Bitcoin struggling, it’s not a surprise that the stock has been trending lower. Liquidity tightening would also imply relatively lower speculative activity. This will impact trading volumes on Coinbase.
However, I believe that gradual accumulation can be considered at and below the $100 level. COIN stock looks oversold, and even with the slightest change in market sentiments, there can be a strong bounce-back.
In terms of positives, Coinbase reported 50% growth in institutional investors on the platform on a year-on-year basis. With wider adoption of crypto, the company stands to benefit. Also, Coinbase has steadily increased the number of assets for trading and custody. When market sentiments turn bullish, this should translate into higher trading revenue.
For 2021, Coinbase also generated $500 million in subscription and services revenue. Revenue from this segment will continue to increase with products like staking, earn and custody. Coinbase also has a strong balance sheet with cash and equivalents of $7.1 billion as of December 2021. This positions the company for aggressive organic and acquisition driven growth.
Riot Blockchain (RIOT)
Among Bitcoin miners, Riot Blockchain (NASDAQ:RIOT) is among the top crypto stocks to consider. The stock has plunged by almost 81% in the last six months. The catalyst for correction has been equity dilution and a sharp decline in Bitcoin price.
However, the company continues to add mining capacity and is positioned for robust growth in the next 12 to 18 months. For April 2022, Riot reported mining of 508 Bitcoin. On a year-on-year basis, the number of Bitcoin mined increased by 150%.
It’s worth noting that the company had a hash rate capacity of 4.7 EH/s (exahash per second). Riot expects to boost capacity to 12.8 EH/s by January 2023. This would imply almost tripling of capacity from current levels. Therefore, the company is positioned to mine 1,500 Bitcoin per month in 2023. This is likely to translate into healthy revenue and EBITDA (earnings before interest, taxation, depreciation and amortization) growth.
As of December 2021, Riot reported a net cash position of $312.3 million. This provides ample financial flexibility for future expansion. Further, as digital assets swell, RIOT stock will be positioned to trend higher once there is a renewed rally for Bitcoin.
Overall, RIOT stock is attractive below $10 levels. I would not be surprised if the stock doubles in the next 12 months.
Hut 8 Mining (HUT)
Another Bitcoin mining company that looks attractive after a deep correction is Hut 8 Mining (NASDAQ:HUT). The penny stock can quickly double once Bitcoin trends higher.
For April 2022, Hut 8 mined 309 Bitcoin with an installed capacity of 2.58 EH/s. Further, the company had total Bitcoin reserves of 6,769 as of April 2022.
Hut 8 also expects to boost mining capacity to 3.55 EH/s by mid-Q2 2022. Therefore, there is a clear growth visibility for the next few quarters.
It’s worth noting that as of December 2021, the company reported $464 million in cash and digital assets. The company has a current market capitalization of $484 million. This is clear indication of undervaluation.
Of course, Bitcoin trades significantly below all-time highs. However, previous rallies have shown that the upside can be sharp. It makes sense to patiently wait for the next leg of upside with cheap crypto stocks like HUT stock, among others.
If Bitcoin returns to $70,000 levels in the next 12 to 24 months, HUT stock is positioned for multi-fold returns.
When broader sentiments turn bearish, markets often tend to overreact. In general, growth stocks are prone to the selling pressure. Block (NYSE:SQ) stock is oversold. The stock is worth considering below $100 levels.
For Q1 2022, Block reported $1.29 billion in gross profit. On a year-over-year basis, profits increased by 34% with Cash App remaining the key growth driver.
In terms of developments specific to cryptocurrency, more than 10 million Cash App customers have bought Bitcoin. Recently, Block also announced the facility to send and receive Bitcoin through the Lightning Network. Overall, Block reported $1.73 billion in Bitcoin revenue for Q1 2022.
Earlier this year, Block founder and CEO also indicated that the company is building an open Bitcoin mining system. The idea is to make Bitcoin mining more efficient and distributed. With ample financial flexibility, Block is positioned to invest in blockchain technology.
I will also not be surprised if the company introduces trading of cryptocurrency through the Cash App in the future. Overall, Block looks attractive as a financial technology company that also has exposure and investments in the crypto space.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.