To The Moon

Crypto stocks with high levels of Bitcoin exposure should be the ones that perform the best through the end of the decade.

$MicroStrategy(MSTR)$ is doubling down on its Bitcoin strategy and plans to add even more Bitcoins to its balance sheet over the next five years.

A rising Bitcoin price should boost $Coinbase Global, Inc.(COIN)$ 's revenue from its crypto trading platform, while the new Bitcoin ETFs will provide a new source of fee income.

If we look at how these 2 crypto stocks have been doing in terms of MACD and Simple Moving Average, they have moved in tandem, so I have reason to believe that these 2 stocks have similar high levels of Bitcoin exposure.

MicroStrategy

Investors for the past 1 year have viewed MicroStrategy as a proxy stock for investing in Bitcoin. That is because they have the largest Bitcoin holdings of any publicly traded company in the entire world currently.

There is a risk in doing that, if MicroStrategy were to reach a point where it simply has too much Bitcoin on its balance sheet, Bitcoin went for a correction, and decline significantly for a long period of time, then the valuation of MicroStrategy might nosedive.

I think we should look at MicroStrategy on its core software business, and we should look at how it continue to build out its core software business over the coming years. MicroStrategy has hinted that new AI-related software offerings might be on the way.

This would help to provide investors some view and guide or at least some diversification and alleviate the risk of having the company's Bitcoin holdings worth more than one-half the value of the company itself.

Investors Portfolios Holding MSTR

From the investor portfolios holding MSTR increase over last 7 days and 30 days, this could be due to Bitcoin rally, but it is still a good indicator that investors are confident of MicroStrategy regardless of the risk and impact if Bitcoin were to go safe.

Remember that MicroStrategy value of company, half of it came from its Bitcoin holdings.

Coinbase Global

Coinbase Global stock price have also been leveraged closely to the price of Bitcoin, but not the same as how MicroStrategy have been. If we look at how Coinbase have been the custodian of the just launched Spot Bitcoin ETFs, I would say Coinbase would be a much better bet on the future direction of the crypto market, and not just on the future trajectory of Bitcoin.

Here is Coinbase Monthly Transacting Users. You can see that the numbers are picking up over the last 3 quarters, this has to do with the core element of Coinbase's business model.

Investors are making trades on its crypto trading platform, this has been boosted significantly by the recent price action in Bitcoin. With Bitcoin pushing all-time highs, retail investors have been lured back into the crypto market.

Bitcoin accounts for more than one-quarter of all trading volume on the Coinbase platform, so this is a welcome development. Presumably, an expanding bull market rally would drive trading in other cryptocurrencies as well.

At the same time, Coinbase is an indirect beneficiary of the new spot Bitcoin ETFs. That is because Coinbase is a custodian for many of the new ETFs, including the highly successful ones launched by BlackRock and Ark Invest. This new custodial fee income is going to boost Coinbase's subscription and services revenue. Over time, this will help to level out the company's revenue during rough market patches.

This nontrading-related revenue is actually a fast-growing category for Coinbase, and also includes stablecoin revenue and blockchain rewards revenue. This is why I think Coinbase is really a play on the growth of the entire crypto and blockchain space, and not just Bitcoin.

This should drive up Coinbase valuation as they are not only into Bitcoin but other crypto as well.

What Will Happen Over The Next 3 Years?

We will not be able to know what is going to happen in the crypto market in 3 years time, because we have been through many uncertainty when it comes to the regulatory environment, and the crypto asset class has historically been extremely volatile.

But there have been some good news as The London Stock Exchange will allow bitcoin and ether-backed ETNs, it said on 11 March. “The London Stock Exchange confirms it will accept applications for the admission of bitcoin and ethereum crypto ETNs in the second quarter of 2024,” the LSE said. The LSE said it would confirm exact launch dates in due course.

So it is possible to piece together key trends and milestones that are likely to push crypto stocks higher. If both retail and institutional investors continue to allocate more of their portfolios to Bitcoin, that is good news for crypto stocks.

And if the Securities and Exchange Commission and other major market continues to approve new crypto investment products, that would also be a positive development.

Summary

As long as Bitcoin remains one of the top-performing assets, it is highly likely that crypto stocks such as MicroStrategy and Coinbase Global will go along for the ride.

I personally think that we should embrace Bitcoin and start thinking of having it in one of our portfolios, if you are still uncomfortable and prefer to wait. I would feel that MicroStrategy and Coinbase would be crypto stocks you can consider.

Appreciate if you could share your thoughts in the comment section whether you think MicroStrategy and Coinbase would remain favorable if Bitcoin rally continue after the halving event?

@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.