2 Crypto Stocks Analysts Think Investors Should Own as Bitcoin Tops $60k
The cryptocurrencies industry has been experiencing remarkable growth over the past several years. The value of all cryptocurrencies has grown to more than $2.5 trillion. According to Valuate, this market is expected to double and reach more than $4.94 trillion in 2024.
After falling sharply in May, the price of Bitcoin (BTC) has bounced back. On October 20th, the price of Bitcoin rose to more than $64,000 as investors cheered the launch of the first futures exchange-traded fund (ETF). Subsequently, stocks with exposure to Bitcoin like Marathon Digital Holdings (MARA), MicroStrategy (MSTR), and Riot Blockchain (RIOT) have also rallied.
In this article, we will look at two crypto stocks that analysts expect will do well as Bitcoin recovers. These are Coinbase (COIN), the second-biggest crypto exchange in the world, and SilverGate Capital (SI).
Coinbase Global is a leading exchange that holds billions in cryptocurrency wallets for its users. It is the second biggest exchange in the world after Binance, which is its Chinese-based competitor.
Analysts are generally optimistic about the Coinbase stock price as Bitcoin and other cryptocurrency prices rebound. Data shows that the average target by Wall Street analysts is at $370. This is almost $60 above where it is currently trading.
There are several reasons why analysts are bullish on Coinbase. First, as the biggest exchange in the United States, the company will benefit as more institutional investors embrace cryptocurrencies.
Indeed, the firm has already inked several deals with institutions. For example, it has reached an agreement with Facebook (FB) for its Novi pilot project. The company will act as a custodian for the company’s wallet. At the same time, the company has a deal with the NBA. These partnerships are important for the company’s custody business that has more than $180 billion in assets.
Second, Coinbase stock could benefit as it moves to the non-fungible token (NFT) industry. This industry was valued at $1 trillion in 2020 and then rose to $2.5 trillion in the first six months of the year. This trend will likely continue.
Third, the company has a strong user growth. In the second quarter, the firm said that the number of monthly active users rose to 8.8 million, which was about 44% increase from the previous quarter. The quarterly volume also jumped to more than $462 billion. This trend will continue as volume and volatility comes back.
There are other reasons why analysts are bullish on Coinbase as well. The company has a good brand name and the ability to launch additional products relatively quickly and easily It also has the ability to raise prices without losing substantial users. Also, analysts at JMP Securities, Oppenheimer, and Needham expect that the stock will rise to $330, $444, and $420, respectively.
SilverGate Capital is a firm that owns SilverGate Bank, a company that provides financial infrastructure services to companies in the crypto industry. The firm is known for its SilverGate Exchange Network (SEN), which provides instant USD settlements. The company also provides commercial banking solutions.
In 2021, the SilverGate’s stock price jumped by more than 120%, bringing its market capitalization to more than $3.95 billion. Analysts are optimistic that the company’s share price will keep rising as Bitcoin prices bounce back.
The average stock price estimate by Wall Street analysts is $153, which is slightly above the present level. Similarly, analysts compiled by TipRanks expect the shares will rise to $161.
The bull thesis is based on several factors. One of which, analysts cheered the strong quarterly results of the company. The firm had a record pre-tax income of more than $29.4 million in the third quarter. This happened as the average deposits rose from $9.9 billion in Q2 to $11.2 billion. Its securities portfolio rose to $7.2 billion while total loans rose by 9% to $1.6 billion. Most importantly, Silvergate also boosted its forward guidance.
Another reason, the company has successfully managed to grow its customer list substantially and there is more room for this growth. The firm has more than 700 customers. While most of these clients are in the cryptocurrencies space, the firm also serves other fintech industries. This is important since the sector is one of the fastest-growing ones.
Additionally, as a bank, the company will benefit as interest rates start rising. With inflation being at elevated levels, and with the US unemployment rate falling, there is a likelihood that the Federal Reserve will start its tightening cycle earlier than expected. This will benefit banks by increasing their profit margin.
Most importantly, analysts believe that investing in Silvergate is an indirect way of investing in Bitcoin without buying it directly.
The Bottom Line
Bitcoin has had a spectacular rebound as demand for the coin has risen. And some analysts expect that it has more room to grow. For example, Cathie Wood believes that it will rise to $500,000 in the next few years.
This trend will benefit companies with a direct exposure to the industry like Coinbase and Silvergate Capital. The two firms have market-leading moats in the industry and are expected to see substantial revenue growth in the future.