Other than perhaps Tesla (TSLA), there’s been no clearer beneficiary of the latest election than Bitcoin (which has risen nearly 21% in the last week alone) and Bitcoin stocks.
The cryptocurrency has, in that time, broken out of a technical channel it’s been trading in for the better part of the year (March through October), surged above $80,000, marked a Golden Cross on its chart, and is currently at new all-time highs, as you can see in the chart below.
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There are a few reasons for Bitcoin’s major appeal right now, most notably:
· President-elect Trump has promised to fire SEC Chair Gary Gensler, who’s long been a foil for the crypto community, on “day one.”
· The market has pivoted fully to “risk-on” mode as the promises of tax cuts and deregulation are raising the prospects of higher profits for corporations that will raise earnings ratios and help normalize heightened equity valuations.
· While it’s generally more correlated with risk sentiment, Bitcoin is often pitched as a hedge against inflation, which many economists believe is likely to return under President-elect Trump’s policies.
In the future, we may look back at the last few months of 2024 as a honeymoon phase for the markets, where deregulation and higher profits are on tap but we haven’t yet felt the sting of tariffs and lower consumer protections.
But with that caveat aside, the rest of the year is setting up nicely for strong returns from all manner of risk-on assets.
So, let’s take a look at three Bitcoin stocks that you can use to ride the risk wave without opening cryptocurrency trading accounts or needing to learn about Bitcoin wallets or self-custody.
A few notes before we get started: we’ve left individual Bitcoin mining companies off this list as they introduce more uncorrelated risk due to individual company performance and priorities.
MARA Holdings (MARA), for instance, is a relatively well-known Bitcoin mining company that has spent a disproportionate amount of time talking about using waste heat from crypto mining to heat greenhouses and shrimp farms.
We’ve also ranked the list below by relative performance to Bitcoin, with the stocks that are most outperforming first.
3 Bitcoin Stocks to Ride the Risk Wave
1. MicroStrategy (MSTR)
MicroStrategy (MSTR) is first on our list as it’s by far the best performer, up 535% in the last year. Bitcoin, on the other hand, is up 126% in the same period.
It’s ostensibly a small software company, but the software component of the business took a backseat a long time ago.
These days, MicroStrategy primarily raises capital through bond and stock sales to buy Bitcoin, which makes it little more than a leveraged bet on the price of BTC.
As of November 10, the company held “279,420 bitcoins, which were acquired at an aggregate purchase price of approximately $11.9 billion and an average purchase price of approximately $42,692 per bitcoin,” per a press release from the firm.
Doing some quick back-of-the-envelope math, MicroStrategy owns $22 billion in Bitcoin at $80,000 per token.
But here’s the rub: The stock is trading with a market cap of over $60 billion, nearly three times the value of its Bitcoin holdings.
That premium valuation can largely be chalked up to co-founder Michael Saylor’s high-profile crypto advocacy and the company’s ability to make institutional-scale leveraged investments into Bitcoin.
Put simply, this is a high-risk/high-reward stock that is entirely dependent on Bitcoin rising in price and the company’s continued ability to raise capital.
2. Coinbase (COIN)
Coinbase (COIN) has also significantly outperformed Bitcoin in the last year, as it’s up 244% in that time.
The company provides both retail investment services and institutional Bitcoin custody and is thus a bit like investing in Goldman Sachs (GS) or Blackstone (BX) in an equity bull market.
It’s primarily an ecosystem stock whose performance is dependent on enthusiasm for investing in cryptocurrencies. Although it does own some Bitcoin for investment purposes (9,363 as of the company’s October 30, 2024, 10-Q filing), it’s not a significant chunk of the overall value of the company.
It’s less of a direct play on Bitcoin as it also supports a wide range of crypto tokens, but it should continue to outperform as long as the appetite for crypto is there.
3. Bitcoin ETFs; iShares Bitcoin Trust (IBIT)
There are a number of Bitcoin funds available to investors, but iShares Bitcoin Trust (IBIT) is probably the best of the bunch.
The exchange-traded product holds Bitcoin directly and doesn’t rely on futures to replicate the performance of the asset, it’s got the highest assets under management (AUM) at $34 billion, and it’s got plenty of liquidity, which makes getting into and out of a position a breeze.
IBIT also has a low expense ratio (0.12% now but will move up to 0.25% after it’s been trading for 12 months) and trades in lockstep with the price of its Bitcoin holdings (current premium is 0.04%).
There are other investment vehicles that have been around for longer, like the Grayscale Bitcoin Trust (GBTC), but the expense ratio there (1.5%) is significantly higher than that of IBIT, even once the 12-month sponsor fee waiver expires in January and the expense ratio for IBIT goes up to 0.25%.
The most conservative way to invest in Bitcoin (if there is such a thing) in your normal brokerage account is something like IBIT, by far, and is a better choice if you’re a long-term holder.
If, on the other hand, you’re looking to swing trade short-term sentiment as the market goes through a sugar rush, MSTR or COIN will probably offer more upside, at least for the time being.
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