As the cryptocurrency market shows signs of life following the sharp selloff that occurred earlier this year, it makes sense that investors might be interested in increasing their exposure to these intriguing virtual currencies in the coming months.
The total market capitalization of the crypto market just surpassed $2 trillion again, which is clearly a sign of institutional accumulation and could be a signal that more gains are on the horizon for crypto enthusiasts.
While these volatile digital currencies are certainly polarizing, with many investors either avoiding them entirely or preaching the Bitcoin gospel to anyone who will listen, it’s hard to argue against the fact that the largest cryptocurrency, Bitcoin, is up over 60% year to date.
It’s no coincidence that the meteoric rise of the crypto market corresponds with more and more major fund managers opening up to the idea of adding cryptocurrency products and services into their investment plans.
Whether you are a true believer in Bitcoin and the potential technological advances that could occur with blockchain technology or not, it’s fair to say that cryptocurrencies are here to stay.
While there are plenty of individual cryptocurrencies to choose from if you are intrigued by their upside, perhaps a safer way to gain exposure to this burgeoning financial instrument is via equities.
Investors can benefit from more liquidity, faster transactions, more straightforward tax implications, and the potential for lower volatility by investing in stocks that offer indirect exposure to cryptocurrencies like Bitcoin.
With plenty of major publicly traded companies and fund managers recognizing the potential for this new asset class, it’s likely only a matter of time before both the crypto and equity markets are even more interconnected.
For now, there are three ways to gain exposure to crypto through equities that really stand out.
Adding shares of the leading cryptocurrency exchange platform in the United States is a great way to gain indirect exposure to these digital currencies, and investors should be attracted to Coinbase Global’s (COIN) growth prospects as the crypto-economy continues to evolve.
As a company that generates fee-based revenue by charging a spread on each crypto trade that occurs on its easy-to-use platform, sharp movements both up and down for leading cryptos like Bitcoin translate directly to more revenue for Coinbase.
While there are plenty of competitors in the crypto exchange space, the fact that Coinbase has developed a trusted brand name and is the top pick for retail crypto traders makes it a true standout in the industry.
With staggering earnings growth in the second quarter and plenty of new paying clients joining the platform in the quarter, including year-over-year retail monthly transacting users growth of 44%, it’s clear that this is the top dog in the crypto exchange space.
There’s also a lot to like about the company’s potential with institutional investors as it expands its products and services to attract “smart money," and if Coinbase can continue to receive regulatory approval to offer cryptocurrency services in countries outside of the U.S. as it has in Germany, the sky is the limit for its business.
Although the stock has been a major underperformer since going public via a direct listing back in April, long-term investors should certainly consider Coinbase to be one of the best ways to gain exposure to cryptocurrencies through equities.
It was not at all surprising to see the news that Square (SQ) purchased roughly $170 billion worth of Bitcoin back in February, which added to the company’s previous purchase in October 2020.
The innovative fintech company that provides payment and point-of-sale solutions to merchants all over the world is helmed by one of the most vocal high-profile advocates of digital currency, Jack Dorsey, and offers another great way for investors to gain exposure to cryptocurrency through equities.
In addition to holding Bitcoin on its balance sheet, Square is doing some unique things with its Cash App, which is an application that provides an easy way for consumers to send, spend, and store money.
Square customers can buy and sell Bitcoin directly from their Cash App balances and even send Bitcoin for free on the platform.
The company reported strong growth in Bitcoin revenue in the second quarter, totaling $2.72 billion, up roughly three times year over year, which was largely driven by the cryptocurrency’s strong price performance thus far in 2021.
The bottom line here is that if you are looking for an attractive growth stock with a share price that is correlated to the price of Bitcoin, Square is a fantastic option to consider.
Finally, Silvergate Capital (SI) is another option to consider for those investors who might be hesitant to purchase actual cryptocurrencies but still want some exposure to the growth potential that the industry has.
It’s likely only a matter of time before major banks get heavily involved in cryptos, which is evident since we have already seen companies like JPMorgan launch in-house Bitcoin funds for private banking clients.
What’s so interesting about Silvergate Capital is that it’s a bank holding company that specializes in helping its customers exchange crypto for U.S. dollars.
The company has created the Silvergate Exchange Network, which is a network of digital currency exchanges and digital currency investors that helps to handle transactions between institutional traders and crypto exchanges.
There is a massive need for real-time U.S. dollar settlement between counterparties in the crypto-economy, and since this company is fulfilling that need, it’s an intriguing option to consider.
With more than 700 digital currency and fintech customers using this company’s unique proprietary platform and rapidly growing customer deposits which increased by $4.3 billion to $11.1 billion in the second quarter, it’s clear that this is another potentially strong way to gain exposure to cryptocurrency through equities.