To The Moon

As we have seen Bitcoin breaking new high over the last 2 days, breaking $41K then $42K, there are certain crypto stocks that have reacted well to this rally.

But I would think there will be some clear winner which would benefit further into 2024, we need to be aware that there is a Bitcoin halving events coming in 2024, this might not be beneficial to miners as the mining rate would be cut.

This halving event historically have seen Bitcoin rally, so investors holding Bitcoin would be the one benefitting the most, similar to companies who offer crypto custodian services or investing services.

I would think these 2 crypto stocks are something we should seriously look at: $MicroStrategy(MSTR)$ $Coinbase Global, Inc.(COIN)$

Bitcoin Correlation With MSTR and COIN

This is the latest 90-day correlation of Bitcoin with MSTR, S&P 500 and COIN, as we can see that all 3 are rising in terms of correlation to Bitcoin.

MSTR has the closest correlation value of close to 1, which mean that any positive rally in Bitcoin, we can see MSTR gaining from it. Similarly we can see that COIN correlation is also rising, it is catching up at 0.8, I will explain why in later section.

Strangely, we can see that S&P 500 correlation is also rising, but it is still at a pretty low level.

MSTR Advantages Over Planned Spot Bitcoin ETFs

We need to understand that Bitcoin price surge is due to more investors buying it, and as we can see more potential institutional adoption. This is where Bitcoin should be able to make another rally soon as well.

Currently MSTR holds 158,400 BTC and plans to buy more amid “promising backdrop of potential increased institutional adoption”.

There has been talks about new spot Bitcoin ETFs coming, generally, people are awaiting approval from SEC, this would be a catalytic event which could benefit stocks in the crypto segment.

There will be investors who will be investing into such Bitcoin ETFs, but do remember there are management fee which might take away some of the gains. The new ETF issuer would still have fee but we do not know the exact amount.

One such ETF, $ProShares Bitcoin Strategy ETF(BITO)$, which invests in bitcoin futures contracts, carries an expense ratio of 0.95%.

While spot bitcoin ETFs would be “a big milestone in the institutional adoption of bitcoin as an asset class, I see them more to complement the different access segments to Bitcoin (BTC)

MicroStrategy on the hand would appeared to be a bitcoin proxy for a number of investors given it’s the largest publicly traded corporate holder of bitcoin.

MSTR Software Business Revenue Could Offset Downside Move In BTC

MicroStrategy also has a “lucrative” software business that can mitigate risks associated with bitcoin, the TD Cowen analyst argued. Third-quarter revenues from the company’s software licenses and subscription services were $45 million and $21 million, respectively. 

The company’s net loss was about $143 million from July to September. Impairment losses on the company’s digital assets reached nearly $34 million for the three-month span. 

From the standpoint of intrinsic value, any downside move in BTC will be partially offset by the stability of the underlying business,

The firm started its bitcoin acquisition strategy on Aug. 10, 2020. From then, until Oct. 31 this year, Bitcoin was up 146% year-to-date.

MicroStrategy stock was up roughly 288% year to date, this has outpacing bitcoin’s price rise of about 142% so far in 2023.

Coinbase (COIN) Spot Trading With 9 Tiers Low Fees

The main service offered is Coinbase spot trading. Margin trading is unavailable. The Coinbase exchange fees use the maker-taker model, as well as a tiered structure based on volume during the trailing 30-day period. The tier is based on the trading volume at the time of placing the order rather than upon its completion.

Transactions using Coinbase trading pairs that include fiat currencies are counted by taking the total amount of USD on all completed orders. The fees do not account for the stable pair trading volume.

If makers and takers trade using stable Coinbase trading pairs, they must pay 0.00% and 0.01%, respectively.

Overall, there are nine tiers to the Coinbase crypto fees. The lowest tier covers traders’ Coinbase volume of up to $10,000 per 30 days with a taker fee of 0.60% and a maker fee of 0.40%.

The fees are reduced as the trading volume increases. In tiers 8 and 9, which cover a Coinbase trade volume of $300-500 million and over $500 million, respectively, makers are not required to pay any fees, while takers pay between 0.05% and 0.60%.

Coinbase (COIN) Volume Since Bitcoin Rally Hovering Around $42,000

Over the last 24 hours, we can see the volume of BTC traded increase, COIN business offer a platform for people to transact BTC, so this would mean they will earn fees when transactions increase

Takers do pay a fees, what is a takers, when you place an order at the market price that gets filled immediately, you are considered a taker.

As we can see that COIN has a more than 300% year-to-date return, and this should be going higher as more and more investors are looking at investing into crypto stocks rather than ETF to avoid the fees, unless a low cost Blockchain ETF came about.

Bitcoin is the highest traded crypto, so if there is a rally in Bitcoin, there will be investors who will be buying into or selling.

So COIN would benefit from it even though they are not a miner for BTC. As more and more institutional are adopting crypto, I would foresee that more and more transaction of BTC would happen over the next few months.

COIN would benefit from these transactions.

Summary

As we have seen Bitcoin currently in a rally, but do remember that we need to be able to identify a crypto stocks which will not be affected by any fluctuations in the BTC prices.

MSTR has a lucrative software business which is earning quite a significant revenue, this could offset any fluctuation in BTC prices.

Similarly, COIN is a platform that offer trading of multiple crypto coins and currencies, so it is not only limited to BTC, but a rally in BTC would see more transactions and earn COIN better in fees.

This is just a simple assessment of why I think these 2 crypto stocks could be a winner when Bitcoin continue to rally.

Appreciate if you could share your thoughts in the comment section whether you think MSTR and COIN would continue to enjoy upside while Bitcoin continue its rally to $50K and beyond.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.