After rallying close to its all-time high, Bitcoin dipped to $16,200 post-Thanksgiving. This was seemingly due to speculation over the Chinese government recovering cryptocurrencies worth $4.2 billion as a part of the Plustoken Ponzi scheme. At the same time, the recent pullback could be seen as a long due correction. Many experts also believe that Bitcoin may fall to the level of $14,000 because of the continued selling by high-net-worth individuals.
The decline in the value of Bitcoin can also be attributed to the tweets by Coinbase CEO Brian Armstrong, indicating that Treasury Secretary of United States Steven Mnuchin is likely to impose new regulation on self-hosted crypto wallets.
Bitcoin’s latest rally is different from 2017 because it is being driven by institutional investors like hedge funds, billionaires, and investment banks. These institutions held Bitcoin with a long-term strategy and the momentum was based on sound fundamentals.
So, this recent dip can be seen as an opportunity of accumulating it before it rises again. According to a billionaire bitcoin investor Michael Novogratz, “Bitcoin is now an institutional asset. Period. The good thing is most institutions aren’t in yet. It’s why 2021 will be as good or better than 2020.”
With Bitcoin’s recent decline, it is also an opportune time for investors to bet on stocks that have core operations in Bitcoin. This is because, when bitcoin regains its momentum, these stocks will be the direct beneficiaries. MicroStrategy Incorporated (MSTR), Riot Blockchain Inc. (RIOT), and Silvergate Capital Corporation (SI) have seen a bull run so far due to the increase in mainstream interest in Bitcoins and these stocks should gain significantly with Bitcoin returning to its momentum.
MicroStrategy Incorporated (MSTR)
MSTR is a software company that offers business intelligence, mobile software, and cloud-based services.
In August, MSTR announced that it has purchased 21,454 bitcoins at an aggregate purchase price of $250 million. This acquisition is a part of the company’s two-pronged capital allocation strategy wherein it adopted Bitcoin as its Primary Treasury reserve asset. According to the company, Bitcoin is a dependable store of value and an attractive investment asset with a greater long-term appreciation potential than cash.
During the third quarter ended September 2020, MSTR revealed that it has purchased a total of approximately 38,250 bitcoins for an average purchase price of about $11,111 per BTC, at an overall purchase price of $425 million. MSTR’s bitcoin gains have surpassed its other earnings over the years. The company’s CEO, Michael Saylor, is quite bullish on Bitcoin and personally owns $240 million worth of Bitcoin.
Citron Research, a short-seller, indicated that MSTR is the safest and most cost-effective way to get exposure to Bitcoin. Citron further predicted that the software company’s Bitcoin treasure chest would continue to grow. Besides this, MSTR is also planning to create a suite of Bitcoin data services, according to the short-seller.
On a year-to-date basis, MSTR rallied 90.2% to close at $271.26 in Friday’s trading session. It is noteworthy that the stock soared 22.1% over the past week. During the last six months, MSTR rose 115.4%.
How does MSTR stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #19 out of 96 stocks in the Internet industry.
Riot Blockchain Inc. (RIOT)
RIOT specializes in Bitcoin mining as well as supporting and handling an entire Blockchain technologies ecosystem. Besides, the company also provides auditing and accounting services for blockchain-based assets. At the end of 2019, RIOT had approximately 7,400 installed and operating miners.
In August, RIOT announced a record purchase of 8,000 S19 Pro Antminers from Bitmain worth $17.7 million with delivery commencing January 2021. This resulted in a Total Hash Rate of 1.45 EH/s.
During the third quarter ended September 2020, RIOT’s revenue climbed 42% year-over-year to $2.4 million, driven by Bitcoin’s rally during the period. Revenue also surged on account of higher hash power. The company mined a total of 222 BTC during the third quarter, up 41% year-over-year.
The company now mines bitcoins exclusively. RIOT also plans to boost its mining operations through four purchase agreements with mining manufacturer Bitmain for nearly 16,600 S19-Pro machines. The company’s cryptocurrency corporate liquidity expanded to $9 million in the third quarter from $7.2 million in the same period last year.
Analysts expect RIOT’s revenue for the quarter ending December to be $3.6 million. Meanwhile, EPS for the quarter is estimated to increase at 20% per annum over the next five years.
RIOT surged 458% year-to-date to end Friday’s trading session at $6.25. Over the past six months, the stock soared 194.8%.
Hence, RIOT is rated a “Strong Buy” in the POWR Ratings. It holds straight “As” in Trade Grade, and a “B” in Peer Grade. It is also the #23 ranked stock in the Technology – Services industry.
SILVERGATE CAPITAL CORP (SI)
SI is a unique bank that offers innovative infrastructure solutions in the cryptocurrency space. It also provides cutting-edge automation and cash management solutions for organizations dealing in digital currency. SI through its Silvergate Exchange Network also focuses on regulatory compliance for digital currency exchange.
SI has more than 900 digital currency customers on its platform daily who are leveraging it to expand their businesses. The company had over 200 prospective digital currency customer leads at various stages of the sales funnel at the end of the third quarter.
Silvergate Exchange Network (SEN), during the third quarter ended September 2020, ran 68,361 transactions, indicating a 455% year-over-year surge. This pushed the company’s digital currency fee income to $3.3 billion, up 106.3% from the year-ago period. SI’s digital currency customers also increased by 22.8% year-over-year to 928 at the end of the third quarter.
The stock ended Friday’s trading session at $33.07, surging 107.9% on a year-to-date basis. During the past six months, the stock rose 124.5%.
SI’s strong momentum is reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. It is also the #8 ranked stock in the Pacific Regional Banks industry.
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MSTR shares were trading at $324.73 per share on Monday morning, up $53.47 (+19.71%). Year-to-date, MSTR has gained 127.67%, versus a 13.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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