It is currently trading near an all-time high, Bitcoin (BTC 5.30%) It continues to lead the crypto market to the top. As a result, analysts and investors continue to raise their Bitcoin price estimates on how high Bitcoin could go. One of the boldest price predictions comes from Cathie Wood's Ark Invest, which detailed a scenario in which Bitcoin could rise above $2 million by 2030.
If this turns out to be true, people will be punishing themselves for not acquiring stocks whose success is closely tied to the price of Bitcoin. The two I'm watching now are Accurate strategy (MSTR 4.11%) And Coinbase International (currency -0.95%).
Accurate strategy
Over the past year, investors have looked to MicroStrategy as a proxy stock for investing in Bitcoin. This is because MicroStrategy currently has the largest Bitcoin holdings of any publicly traded company in the entire world. Currently, the company has 193,000 Bitcoins on its balance sheet, worth an estimated $13 billion at today's market prices. By comparison, MicroStrategy's total stock market cap is $21 billion.
If anything, this highly leveraged Bitcoin position will only grow over the next few years as the company has just announced a massive new offering of convertible securities worth $700 million. The purpose of the new offer is astonishingly simple: to buy more Bitcoin. So get ready to hear more from MicroStrategy about your overall Bitcoin strategy. Indeed, Bitcoin's aggressive strategy has pushed the company's stock price to its highest level in 24 years.
The only caveat here, of course, is that a company could reach a point where it simply has too much Bitcoin on its balance sheet. If the price of Bitcoin declines significantly for an extended period of time, MicroStrategy's valuation may decline.
For this reason, I would like to see MicroStrategy continue to build out its core software business over the coming years. The company has hinted that new AI-related software offerings may be on the way. This would help provide at least some diversification and mitigate the risk of a company holding Bitcoin holdings worth more than half the value of the company itself.
Coinbase International
Coinbase Global's stock price is also leveraged against the price of Bitcoin, but not nearly to the same degree as MicroStrategy. In my view, Coinbase is a bet on the future direction of the cryptocurrency market, not just on the future path of Bitcoin.
However, the core element of Coinbase's business model — investors who trade on its cryptocurrency trading platform — has been significantly boosted by Bitcoin's recent price action. With Bitcoin rising to all-time highs, retail investors have been drawn back into the cryptocurrency market. Bitcoin accounts for more than a quarter of the total trading volume on Coinbase, so this is a welcome development. The bull market rally should drive trading in other cryptocurrencies as well.
Image source: Getty Images.
Meanwhile, Coinbase is an indirect beneficiary of the new Bitcoin ETFs. This is because Coinbase is the custodian of many new ETFs, including the very successful ones it launched Black stone And Ark Invest. This new custodial fee income will boost Coinbase's subscription and service revenue. Over time, this will help level out the company's revenues during difficult market corrections.
This non-trading revenue is actually a fast-growing category for Coinbase, and also includes stablecoin revenue and blockchain rewards revenue. That's why I think Coinbase is actually a play on the growth of the entire cryptocurrency and blockchain space, not just Bitcoin.
What will happen until 2030?
Keep in mind that it is impossible to predict exactly what will happen in the cryptocurrency market over the next approximately seven years. There is a lot of uncertainty when it comes to the regulatory environment, and the crypto asset class has historically been very volatile.
But it is possible to piece together key trends and milestones that are likely to push cryptocurrency stocks higher. If both retail and institutional investors continue to allocate more of their portfolios to Bitcoin, that's good news for cryptocurrency stocks. If the SEC continues to approve new investment products in the cryptocurrency space, that will also be a positive development.
As long as Bitcoin remains one of the best-performing assets, it is very likely that cryptocurrency stocks like MicroStrategy and Coinbase Global will continue to rise.
