The price of Bitcoin (BTC 1.30%) recently soared past $46,000 after Tesla invested $1.5 billion in the cryptocurrency and said it would soon start accepting it for payments. It might be tempting to chase that rally, but investors should realize Bitcoin is still a highly speculative investment.

Instead of directly gambling on the volatile cryptocurrency, investors should consider buying three other promising fintech stocks: Square (SQ -0.42%), PayPal (PYPL 0.10%), and Adyen (ADYE.Y 2.90%).

Physical bitcoins on top of a smartphone.

Image source: Getty Images.

1. Square

Square, which provides online payment services for individuals and businesses, added Bitcoin trading to its Cash App in early 2018. It buys Bitcoin and sells it to Cash users for a slim profit, but doesn't charge any additional transaction fees.

Square's Bitcoin revenue surged 731% year-over-year to $2.82 billion, or 44% of its top line, in the first nine months of 2020. Those trades generated a gross profit of $56 million, up from $5 million a year ago, and accounted for 3% of Square's total gross profit.

That surging interest in Bitcoin benefited Square in three ways. First, it offset a slowdown in its seller-based transaction business, which struggled as smaller businesses shut down throughout the pandemic.

Second, it elevated the profile of its Cash App, which surpassed 30 million active users last June. Lastly, it complemented the Cash App's growing ecosystem of fintech services, which includes mobile deposits, free stock trades, and upcoming tax preparation services from Credit Karma.

Analysts expect Square's revenue to roughly double in fiscal 2020, but for a higher mix of lower-margin Bitcoin trades to reduce its adjusted earnings by 5%.

But next year, they expect Square's revenue and earnings to rise 39% and 51%, respectively, as the pandemic passes and its higher-margin transaction revenue rises again. Square's stock initially seems expensive at over 200 times forward earnings, but it only trades at about eight times next year sales, which makes it cheaper than many other high-growth tech stocks.

2. PayPal

Investors who think Square is too hot to handle should take a closer look at PayPal, its larger rival in online payments.

A woman makes a mobile payment at a store.

Image source: Getty Images.

PayPal previously shunned Bitcoin, but it started allowing users to buy, hold, and sell Bitcoin and other cryptocurrencies in late 2020. It also allowed its 29 million merchants to start accepting cryptocurrency payments.

PayPal doesn't generate any significant revenue from Bitcoin transactions yet, but its core business remains strong. In fiscal 2020, its number of active accounts grew 24% to 377 million, its total number of transactions increased 25% to 15.4 billion, and its TPV (total payment volume) grew 31% to $936 billion.

Its Venmo app, which competes against Square's Cash App, accounted for $159 billion of that TPV -- representing 56% growth from a year earlier. Its merchant services volume also rose 33%.

PayPal's revenue and adjusted earnings rose 23% and 29%, respectively, in 2020. It expects its revenue and adjusted earnings to rise another 19% and 17%, respectively, in fiscal 2021. PayPal's stock trades at just under 50 times forward earnings and 13 times this year's sales, which are reasonable valuations for a market leader with an early-mover's advantage in the war on cash.

3. Adyen

Adyen might not be a familiar name to U.S. investors, but the Dutch payments company notably lured eBay away from its former subsidiary PayPal in 2018. eBay plans to transfer most of its merchants and shoppers to Adyen later this year.

Adyen went public in Europe that same year, and its business remained resilient throughout the pandemic. Its revenue rose 28% in 2020, its payment volume increased 27%, and its net income grew 11%.

Analysts expect Adyen's revenue and earnings to rise 40% and 57%, respectively, this year as the pandemic passes, it expands across eBay's marketplaces, and its transactions from smaller businesses stabilize.

Based on those estimates, Adyen trades at roughly 160 times forward earnings and about 60 times this year's sales. Those valuations are frothy, but Adyen could grow into its valuation as the mobile payments market expands.

Adyen doesn't directly support Bitcoin payments yet. But based on Square and PayPal's moves, it could only be a matter of time before it rolls out integrated Bitcoin and cryptocurrency purchases.