The cryptocurrency market has faced a rough patch recently, with Bitcoin (BTC) prices falling sharply after peaking in March. On July 3, Bitcoin was priced around $58,600, a significant drop from its all-time high of $73,750.07 on March 14.
In 2023, Bitcoin saw a notable rally, rising 157%. The year started on a high note when the Securities and Exchange Commission (SEC) approved 11 spot Bitcoin exchange-traded funds (ETFs) in January. This decision made it easier for regular and institutional investors to invest in Bitcoin in a regulated manner. This approval greatly boosted the market, resulting in a flow of around $14.41 billion into these ETFs, according to a CCData report.
However, the rise slowed in April due to the Bitcoin halving event, which occurs every four years. This event halves the rewards for mining new Bitcoin, with the goal of limiting the total number of Bitcoins to 21 million. Although this typically increases demand and prices, the recent drop is expected to be temporary as the effects of the halving are still manifesting.
Federal Reserve Chair Jerome Powell announced after the June FOMC meeting that there would be only one interest rate cut this year, instead of the three cuts projected in March. Even a single 0.25% rate cut was received positively, especially since many were not expecting cuts in 2024. The FOMC’s latest forecast suggests a full 1% interest rate drop by 2025, which could reduce the federal funds rate to 4.1% by the end of 2025. This outlook is seen as favorable for industries such as manufacturing and the broader economy.
Markets are now anticipating a rate cut in September, which will likely boost the cryptocurrency market. Lower interest rates benefit growth assets such as technology stocks, consumer discretionary stocks and cryptocurrencies.
Our best options
We have identified three cryptocurrency-focused stocks that we believe have strong potential heading into 2024. Each of these stocks has a high Zacks Rank of either #1 (Strong Buy) or #2 (Buy).
1. NVIDIA Corporation (NVDA)
NVIDIA is a world leader in visual computing technology and creator of the GPU. The company’s focus has expanded from PC graphics to AI-based solutions, supporting high-performance computing, gaming and virtual reality. NVIDIA’s expected earnings growth rate for this year is 106.2%, and the Zacks Consensus Estimate for earnings has improved 12.1% over the past 60 days. NVIDIA is a Zacks Rank #1.
2. Robinhood Markets, Inc. (HOOD)
Robinhood operates a financial services platform in the US that allows users to invest in stocks, ETFs, options, gold and cryptocurrencies. Through its Robinhood Crypto platform, it trades Bitcoin, Ethereum, Dogecoin and other cryptocurrencies. Robinhood’s expected earnings growth rate for this year is over 100%, and the Zacks Consensus Estimate for earnings has improved 93.1% over the past 60 days. Robinhood has a Zacks Rank #2.
3. Interactive Brokers Group, Inc. (IBKR)
Interactive Brokers is a global automated electronic broker that handles cryptocurrency trading. Its commodity futures trading desk offers clients the ability to trade cryptocurrency futures. Interactive Brokers has an expected earnings growth rate of 16.2% for this year, and the Zacks Consensus Estimate for earnings has improved 1.4% over the past 60 days. Interactive Brokers is a Zacks Rank #2.
4. Coinbase Global, Inc. (COIN)
Coinbase provides financial infrastructure and technology to support the global cryptocurrency economy. It offers a primary financial account for cryptocurrency consumers, a liquidity marketplace for institutional transactions, and technology and services for developers to build cryptocurrency-based applications and securely accept cryptocurrency as payment. Coinbase’s expected earnings growth rate for this year is over 100%, and the Zacks Consensus Estimate for earnings has improved 2.6% over the past 60 days. Coinbase has a Zacks Rank #1.
Why it makes sense to invest in Bitcoin stocks
Investing in Bitcoin-related stocks can be a smart decision for several reasons. First, these stocks offer a way to gain exposure to the cryptocurrency market without purchasing Bitcoin directly, which can be volatile and difficult to manage. By investing in companies involved in the crypto space, you can benefit from the overall market growth while potentially reducing some of the risks.
Second, these stocks typically belong to companies that have diverse business models. For example, NVIDIA’s involvement in artificial intelligence and gaming, Robinhood’s broader investment platform, Interactive Brokers’ wide range of trading options, and Coinbase’s financial infrastructure mean these companies have multiple revenue streams. This diversification can provide some stability even if the cryptocurrency market experiences declines.
Lastly, the adoption of cryptocurrencies and blockchain technology is still in its early stages. As more industries and governments recognize and integrate these technologies, companies involved in the crypto space are likely to see significant growth. By investing now, you could position yourself to benefit from these trends over the long term.
Also read: Bitcoin Falls on US Political Issues and Concerns Over Mt. Gox Sale