If history is any guide, the crypto market is poised for a major rally in the months leading up to the next Bitcoin (BTC-USD) halving event. As we approach the new year, speculators could push up the prices of cryptocurrencies, benefiting traditional stocks with crypto exposure. In the past, crypto stocks appreciated in the months leading up and after Bitcoin halvings.
The first Bitcoin halving occurred in 2012 when mining rewards halved from 50 BTC per block to 25. In fact, the Bitcoin halving occurs in 4-year cycles to help maintain scarcity and counteract inflation by cutting miner rewards. Following the Bitcoin halving of 2024, the next cycle will see the block reward for miners fall from 6.25 BTC to 3.125 BTC.
To position a portfolio for maximum gains around the next Bitcoin halving, these three crypto stocks tied to blockchain technology are poised to reap the most rewards.
Riot Blockchain (RIOT)
As the next Bitcoin halving approaches, efficiency will be the key to the drop in mining rewards from the Bitcoin halving. Riot Blockchain (NASDAQ:RIOT), one of the largest crypto miners in the world, is leading the low-cost mining of Bitcoins.
RIOT recently invested $162.9 million to triple its mining capacity ahead of the Bitcoin halving event. The company acquired 33,280 “next-generation” Bitcoin miners in June and should be able to maintain and even increase its Bitcoin production.
The company mined 1,100 BTC in the third quarter, producing revenue of $51.9 million. At the time of reporting, it had around $290 million in cash, with over 7,300 BTC in its cryptocurrency wallets (worth around $275 million). RIOT even saw its adjusted EBITDA soaring 7-fold to $31.6 million from $4.3 million last year and is well-positioned to benefit from the upcoming halving.
Crypto exchange Coinbase (NASDAQ:COIN) also tends to rally around the Bitcoin halving events. Although it doesn’t mine BTC, it provides technology and financial infrastructure for the crypto economy. More specifically, it provides a marketplace and a liquidity pool to maintain crypto transactions for individuals and institutions.
As BTC rises before and after the Bitcoin halving, Coinbase’s transaction fees, a percentage of trade volumes, should also increase. Since the company earns money on every trade, it implies higher revenue and profits, making Coinbase a smart crypto stock proxy play.
The company has $5.5 billion in cash, and in its third-quarter earnings report, it raised its outlook for adjusted EBITDA for the full year. Its net revenue saw sustained growth over the last year, rising from $576 million to $623 million in the third quarter.
Interactive Brokers (IBKR)
Interactive Brokers (NASDAQ:IBKR) is a global broker providing trading and exchange accounts for clients with exposure to cryptocurrencies. However, it also has its own futures trading desk to supply crypto derivatives to clients. Besides Bitcoin, the company provides financial services for other markets. Its diversified portfolio isn’t exclusively reliant on cryptocurrencies, making it a solid defensive play.
Additionally, IBKR launched a new product last year to allow customers to custody cryptocurrencies. And the company offered it in integration with traditional financial instruments in a single account. This innovative offering makes it simpler and more convenient for investors to gain cryptocurrency exposure. So, when the next wave of adoption begins, it should attract greater interest to IBKR’s platform.
IBRK trades at a P/E ratio of 28.8x, with a forward dividend yield of 0.5% and a market capitalization of $34.1 billion. Its latest report showed that it had $404 billion in client equity, up 27% from last year. Additionally, the company increased the number of clients holding accounts by 21% to 2.4 million last quarter, suggesting continued growth.
On the date of publication, Stavros Tousios 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.