The recent Bitcoin (BTC-USD) might have cooled down, with the price dropping well below $30,000. But I believe this rally is unlikely to be the last of it for BTC — conditions seem perfect for another rally in the near future, which could be hugely beneficial for crypto stocks.
First, the Bitcoin halving event in Q1 2024 will considerably change the supply and demand dynamics of BTC. It won’t change prices overnight, but miners will refuse to sell if their markup declines, driving up the price. Many miners are already stockpiling their mined BTC as they anticipate higher prices in the future.
Second, the Federal Reserve’s rate cuts and the turmoil in the banking sector, coupled with a recession on the horizon, will positively impact Bitcoin. Of course, that doesn’t mean BTC will remain unharmed during a potential recession but, as we’ve seen recently, turmoil in the banking sector boosts it since many see the blockchain as safer than some banks.
All things considered, I believe the following three crypto stocks are well-positioned to capitalize on the rally:
Marathon Digital (MARA)
Marathon Digital (NASDAQ:MARA) is a Bitcoin mining company that has seen very impressive growth this year. MARA stock is up 211%-plus year-to-date, outperforming even BTC as mining companies were put on the back burner during the crypto selloffs.
I consider MARA stock to be among the best bets you can make in the crypto sector right now, as it essentially magnifies the movement of Bitcoin with much less risk than if you were to use leverage or invest directly in more speculative altcoins. I would still note that there is substantial downside risk at this range, but it’s a clear buy if you’re looking to invest for a multi-year timeframe.
That’s because the company’s stash of BTC is the largest in the entire industry at over 11,000. That’s growing at 8.4% annually at the March growth rate, even if you discount the acceleration in mining power. We’ll also likely see a much better Q1 due to the price lift.
ProShares Bitcoin Strategy ETF (BITO)
ProShares Bitcoin Strategy ETF (NYSEARCA:BITO) is an ETF that basically mirrors the price action of BTC. Of all crypto stocks, BITO is a good choice if you don’t wish to invest in Bitcoin directly or don’t want to deal with the hassle of storing and maintaining your keys throughout your investment period. It’s a great way to amplify your 401k or Roth IRA plans, and I believe it’ll pay off in the long run.
I would note that the fund does not hold or invest in any BTC. It simply tries to mirror the price through futures. As a result, you get all the benefits of BTC’s price action but without the risk of losing your keys, getting hacked, cold storage decay, or dozens of other possible ways to lose your BTC. That also includes the convenience of having the Commodity Futures Trading Commission regulate the ETF.
Bitfarms (NASDAQ:BITF) is another one of the crypto stocks that specialize in mining BTC. It has slightly less returns than MARA stock, but the upside of having BITF is that the company is less risky as it continues to deleverage itself. Total debt is at just $23 million, down 86% from mid-2022. It also mined 1,297 BTC by February, substantially up from the year-ago period considering it mined 5,167 for the whole of last year. Furthermore, the mining capacity target for 2023 is 6 EH/s, a 180% spike YOY.
If the company keeps up that growth momentum, I expect BITF to be a multibagger.
On the date of publication, Omor Ibne Ehsan did not have (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.