Updated on October 15, 2024; first published on March 14, 2024.

On October 15, 2024, Bitcoin's price hit $66,000 again, drawing attention to the market.

As cryptocurrency prices rise, investors are paying more attention to cryptocurrency-related stocks.

These stocks belong to companies that are integral to the cryptocurrency ecosystem, engaging in activities like mining, trading platform operations, payment processing, and blockchain technology advancement.

The performance of these stocks often mirrors the volatility of the cryptocurrency market. Consequently, when cryptocurrencies thrive, the share prices of these companies tend to increase, and the opposite is true when the market dips.

According to a Motley Fool article from March 3, 2024, $Coinbase (COIN.US)$, $MARA Holdings (MARA.US)$ and $MicroStrategy (MSTR.US)$ are three US stocks expected to be winners in the cryptocurrency wave.

What makes these three companies special? What advantages and risks do they have? In this article, we will take a closer look at each of them.

Coinbase（COIN）

Coinbase, established in 2012, has grown to become one of the world's preeminent cryptocurrency exchanges. Initially centered on Bitcoin trading, it has since expanded to offer a broad array of digital assets. In 2023, Bitcoin transactions constituted 34% of Coinbase's trading volume, with Ethereum at 20% and the Tether stablecoin at 11%, while other cryptocurrencies made up the balance.

Yet, Coinbase's financial performance is closely intertwined with the volatile crypto market. The company's revenue is significantly affected by the fluctuating prices of Bitcoin. For example, the steep decline in Bitcoin's value in 2022 resulted in a near 60% reduction in Coinbase's revenue.

Market analysts posit that the recent uptick in Bitcoin and Ethereum prices could entice more retail investors back into the fold, potentially bolstering Coinbase's operations. Motley Fool analysts project that from 2023 to 2026, Coinbase's revenue and EBITDA might witness a compound annual growth rate of 9%.

In the past year, Coinbase's stock price has increased by 153.49%. Notably, ARK Investment's manager, Cathie Wood, has recently been increasing her position in Coinbase's stock.

Cathie Wood has been a long-term supporter of blockchain and cryptocurrencies. She started buying Coinbase shares back in 2021 and has continued to add to her holdings, making Coinbase one of her largest positions. According to reports, since September 11, she has been increasing her stake in Coinbase, with a total value of $2.2 million, which accounts for 7.43% of her ARKF fund.

MARA Holdings（MARA）

MARA Holdings, the world's top Bitcoin mining firm, saw a significant 210% increase in its mining haul to 12,852 bitcoins in 2023, setting a record. By year's end, it held 15,126 bitcoins worth roughly $947 million, plus $357 million in cash and equivalents.

Mining companies like MARA Holdings operate on an energy arbitrage business model, which seeks to maximize bitcoin production while minimizing costs. However, this model faces challenges, particularly due to the significant capital investments required for purchasing mining equipment.

These companies' profitability hinges on the efficiency of their bitcoin mining operations and the value appreciation of bitcoin. They often carry substantial debt levels, making them sensitive to bitcoin price movements, which can greatly influence their profits and cash flows.

Historical trends indicate that mining stocks may see amplified gains when bitcoin prices rise, due to the perceived leverage effect. Conversely, when bitcoin prices fall, mining companies tend to be hit harder.

Analysts at Motley Fool suggest that MARA Holdings's growth potential is anchored in the expansion of its mining capabilities and the upward trajectory of bitcoin prices. Over the previous year, MARA inaugurated two new facilities and secured agreements to purchase additional mining sites, which could enhance operational efficiency.

Motley Fool analysts project that MARA Holdings's revenue will grow at a 48% compound annual growth rate from 2023 to 2025. This growth could be further propelled if bitcoin prices maintain their upward trend and the company continues to expand its mining footprint.

In terms of stock performance, MARA has been the weakest performer among the three cryptocurrency concept stocks, but its stock price has still increased by 100.95% in the past year.

MicroStrategy（MSTR）

MicroStrategy is one of the largest Bitcoin holders globally, despite its core business being unrelated to cryptocurrency. The company provides analytics software and services to clients like Hilton Hotels and Sony.

While transitioning from product licenses to a cloud-based subscription model, its revenue has plateaued at around $500 million for the last five years.

Despite slow growth in its core business, MSTR possesses a valuable asset: Bitcoin. CEO Michael Saylor, a vocal Bitcoin proponent, has led MicroStrategy to invest heavily in Bitcoin since August 2020, using excess cash, debt, and equity to purchase the cryptocurrency.

As of September 2024, the company holds 252,220 bitcoins, making it the largest holder among companies worldwide.

Investors may view MicroStrategy as a company with a two-pronged strategy: it generates steady revenue from its core SaaS business while also aggressively investing in Bitcoin, using low-cost capital. However, its valuation is highly sensitive to Bitcoin's volatile price movements.

MicroStrategy's stock price has risen by 501.26% over the past year. Recently, the stock reached an all-time high, with a market capitalization of $40.86 billion (based on the closing price on October 14, 2024). MSTR held 252,220 bitcoins, which, at a price of $68,000 per bitcoin, is valued at approximately $17.1 billion. This means that the value of its bitcoins accounts for nearly half of the company's market capitalization.

Risks of investing in crypto-related stocks

Investing in crypto-related stocks presents considerable risks, including:

1. High Volatility: The cryptocurrency market is known for its rapid and extreme price swings, which can directly affect the value of crypto stocks.

2. Regulatory Risks: Crypto regulations are still evolving, and changes can have significant implications for businesses in this sector and their stock prices.

3. Technical and Security Risks: Crypto companies depend on digital infrastructure that is susceptible to hacking and other security breaches, posing risks to business continuity and investor trust.

Investors should approach these stocks with caution, ensuring they align with their investment goals and risk appetite, and conduct thorough due diligence before committing capital.

Additional Disclosures: This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct.