After breaching the $40,000 resistance on December 3rd, Bitcoin (BTC) is up 25% over the month, now holding at $44,000 range. Year-to-date, only the most exceptional high-growth stocks could compare to Bitcoin’s 165% gains.
However, at a $853 billion market cap, Bitcoin is still far from the November 2021 peak of $1.2 trillion. Moreover, market liquidity is lower in a higher interest rate environment that shows recessionary signals than in the previous cycle.
The expected interest rate cuts, Bitcoin ETF approvals, and the 4th BTC halving are all converging at the end of H1 2024 to counter that and make a new bull market. With the 70% dominant holding pressure from long-time holders (LTHs), Bitcoin could surpass the $68.7k all-time high next year.
But for stock investors, which companies could benefit the most from the broader crypto resurgence pulled by Bitcoin?
Hut 8 Corp
Bitcoin’s digital value is owed mainly to its grounding in physicality provided by miners’ computing power. Mining companies undergo regular capitulation and accumulation phases. When their margins get narrow, they sell off BTC reserves. As such, they serve as potential sell pressures.
In turn, when miners capitulate, as happened with Core Scientific, the selling pressure is lowered, and the mining difficulty is reduced. This represents a boon for the remaining miners as their profit margins are increased.
Canadian Hut 8 Corp (NASDAQ:) underwent such rigors, holding 9,113 BTC as of the latest October 31st report. Of those, 7,016 are tagged as unencumbered, meaning the company hasn’t collateralized them for operations. On average, Hut 8 churns 3.6 BTC daily.
Despite a severe crypto winter following multiple crashes culminating in FTX fraud, Hut 8 managed to preserve its cash flows at CAD$21.1 million this Q3 compared to CAD$33 million from a year-ago quarter.
Mirroring the BTC price rise this year, HUT shares are up 156%. In addition to BTC mining, Hut 8’s seven data center sites cover cloud services, machine learning, and VFX rendering. In November, the company received Canadian court approval to pursue the acquisition of four power plants in Ontario, worth 310 MW of energy output for Bitcoin mining.
Block, Inc.
It is no secret that Jack Dorsey is a Bitcoin maximalist proponent. Block Inc (NYSE:)’s payment company offers a convenient way to enter the crypto waters via the popular CashApp. In the Q3 ’23 earnings report, Block generated 5.62 billion in revenue, of which 43% came from Bitcoin.
The company’s gross profit increased 21% year-over-year to $1.9 billion, with 27% growth for CashApp at $984 million. From selling $2.42 worth of BTC through CashApp, Block earned $45 million in gross profit, a 22% year-over-year increase.
Following BTC’s rapid rise over the last month, SQ stock went up 40%, even outpacing Bitcoin. Based on 40 analyst inputs pulled by , SQ stock is a “strong buy”. The average SQ price target is $72.4 vs. the current price of $69. The high estimate is $100, while the low forecast is $46 per share.
Coinbase Global, Inc.
Bitcoin ETF approvals are one of the major Bitcoin hype drivers this cycle. Coinbase Global Inc (NASDAQ:) has been selected as a custodian by nine out of twelve spot-traded BTC ETF candidates. This is unsurprising, given that BlackRock (NYSE:), the world’s largest asset manager, picked Coinbase to offer crypto services to institutional investors last August.
Moreover, Coinbase has been cultivating ties with government agencies by selling them blockchain analytics software. Although the exchange still came under SEC scrutiny, Coinbase is considered one of the most scrutinized and regulated crypto platforms.
As the beneficiary of institutional BTC inflows and the larger crypto market with Binance.US out of the picture, Coinbase is strongly positioned for the next bull run market. This year already, COIN shares are up massively by +321%.
In Q3 ‘23 earnings report, Coinbase reported continued transactional revenue recovery. At $288.6 million, it is still far from the year-ago quarter of $365.9. However, it is telling that Coinbase had $374.7 million in transaction revenue in Q1 ‘23, courtesy of the regional US banking crisis.
In addition to crypto custody, Coinbase is a part of the Centre Consortium, the governing body for the second largest stablecoin USDC. This generated Coinbase $172.4 million in revenue this quarter, up 126% from the year-ago quarter. Most importantly, Coinbase decreased its transaction expenses, now at 15% of total revenue compared to 18% from the year-ago quarter.
Based on 22 analyst inputs pulled by Nasdaq, COIN stock is a “buy”. The average COIN price target is $95.78 vs the current $141. The high estimate is $160, while the low forecast is $35 per share, owing to BTC price volatility.
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This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
