Over the last couple of years, more and more publicly traded companies have entered the cryptocurrency sector in some form or another.
Some have opted to add new products and services catering to the nascent market, while others have put Bitcoin directly on their balance sheet.
This means that a public company's association with Bitcoin or cryptocurrency doesn't necessarily mean purchasing the stock will offer exposure to price movements within the asset class itself.
Below, we review five stocks that offer indirect exposure to Bitcoin without actually buying Bitcoin.
MicroStrategy has long offered a suite of data intelligence products, but has made a name for itself of late due to its association with Bitcoin.
In August 2020, the company made its first Bitcoin purchase, buying $250 million worth of the digital asset using cash reserves on the company's balance sheet. Since then, MicroStrategy CEO Michael Saylor has become one of the asset's most outspoken evangelists.
The company has continued to add to its Bitcoin holdings and it now holds 91,579 Bitcoin valued at over $5.3 billion. The company has spent approximately $2.2 billion to acquire its Bitcoin. Ever since these purchases, the company's stock price has correlated heavily with Bitcoin’s.
In the last year, MSTR has seen an increase of 498% while Bitcoin has increased nearly 681% at the time of writing. MicroStrategy’s huge Bitcoin holdings, along with its CEO’s consistent public support for Bitcoin, continue to make both asset price movements similar.
In the last quarter, MSTR has increased nearly 32% compared to Bitcoin’s over 51% increase. The continued similarities in price action going into 2021 show how intertwined the two assets have become.
In January of 2021, the electric car manufacturer announced via an SEC filing that it had invested $1.5 billion into Bitcoin.
No one-off announcement, Tesla announced weeks later that it would begin accepting Bitcoin as a form of payment for the companies vehicles. At the time, company officials also said that they would not be converting Bitcoin back to dollars and that they would instead hold them.
Still, this strategy hasn't been a clear hit with investors.
Sometime after the company's initial purchase, Daniel Ives, an analyst at Wedbush, told CNBC that, "With Tesla diving into the deep end of the pool on bitcoin, Musk runs the risk that this side show can overshadow the fundamental EV (electric vehicle) vision in the near term for investors."
While Tesla's stock price hasn't closely followed Bitcoin's price in the last couple of months, the company has solid exposure to the cryptocurrency. Any large swing in Bitcoin's price could trigger similar swings in Tesla's price going forward.
In the last year, Tesla has increased over 533% while Bitcoin has increased over 681%.
In the last quarter, Bitcoin and Tesla have deviated from each other. Bitcoin has increased over 51% while Tesla has experienced a -12.38% drop.
One of the earliest companies to embrace Bitcoin, Square began allowing its users to buy, sell and store Bitcoin and other cryptocurrencies in 2018.
Still, it wasn't until 2020 when the payments company announced its purchase of approximately 4,709 Bitcoins for $50 million.
Later in the year Square revealed another $170 million purchase of Bitcoin bringing the company's holdings to just over 8,000 Bitcoin. Square’s presence in the cryptocurrency space as both a product provider and an investor gives investors exposure to the cryptocurrency industry as a whole, though it hasn't perfectly tracked Bitcoin's performance as of late.
Like Tesla, tech, as well as fintech stocks, have not performed as well as Bitcoin in the first quarter of 2021, which is not that surprising given Bitcoin’s intense run-up. When comparing tech ETF QQQ and fintech ETF ARKF vs Bitcoin's performance, Bitcoin pulls away early in the year.
At the beginning of the year, Square seemed to follow Bitcoin closely until Bitcoin started to break away in early February. In the first quarter, Square stayed flat with a -0.10% compared to Bitcoin’s 51%.
Marathon Digital Holdings (MARA)
Marathon Digital holdings is a large cryptocurrency mining company, meaning that it devotes computing resources to minting new bitcoins directly.
Due to the nature of its business, investors may speculate that Marathon’s success will be closely tied to Bitcoin's price performance.
Adding to the correlation is that Marathon has over 5,000 Bitcoin on its balance sheet. With Bitcoin’s impressive performance this year, Marathon's stock has experienced large increases in price.
In the first quarter of 2021, Marathon increased over 153% in contrast to Bitcoin’s over 51%. The exact reason behind Marathon’s massive rise is not exactly known, but it is likely due to speculation around Bitcoin.
In the last five days, Marathon has jumped 8.5% compared to Bitcoin’s -3.6%. This is largely due to Marathon’s announcement on Tuesday that it will be launching a mining pool, adding another product line to its business.
While PayPal does not own any Bitcoin, it announced in October 2020 that it would enable its users to buy, sell and hold cryptocurrency directly in their accounts.
This news was significant for the cryptocurrency industry due to the sheer quantity of PayPal users and merchants. The news gave further hope of further mainstream adoption with the payments use-case of Bitcoin.
More recently, PayPal announced it would go one step further and enable payments with crypto. PayPal users can now seamlessly convert their crypto holdings for dollars to make purchases.
In the first quarter of 2021, PayPal’s stock price increased a strong nearly 8%. Like the other tech and fintech stocks, PayPal's stock price couldn't quite track Bitcoin's rapid increase in price in the first quarter of 2021.
While PayPal does not hold any Bitcoin, its deepening involvement in the crypto industry as a wallet, exchange and payments provider could further correlate its stock movements with Bitcoin's going forward.