Dogecoin (DOGE -4.02%) is a minor cryptocurrency that initially gained some traction during the cryptocurrency bubble three years ago. Interest in dogecoin seemingly faded after that bubble popped, but its price abruptly surged about 850% this year.
The rally started as speculative traders on Reddit dubbed it the "next Bitcoin (BTC -4.13%)," and additional support from celebrities like Elon Musk, Snoop Dogg, and Gene Simmons propelled its price to all-time highs.
However, there's very little evidence that Dogecoin will ever gain as much mainstream recognition or acceptance as Bitcoin. So instead of making brash bets on a cryptocurrency inspired by a meme, investors should check out these three adjacent tech stocks instead.
Square (SQ -8.54%) is mainly an online payments provider, but it also represents one of the easiest ways to gain exposure to Bitcoin without directly buying the cryptocurrency or investing in an overpriced ETF.
Square buys Bitcoin for two purposes. First, it holds it on its balance sheet as an investment. At the end of 2020, Bitcoin accounted for roughly 5% of its $3.16 billion in cash and cash equivalents.
Second, it lets its Cash App users buy and sell Bitcoin. It buys the Bitcoin for those users and sells it at a slight premium to the market price. Square claims over 3 million of Cash's 36 million active users purchased or sold Bitcoin in 2020, and over a million users bought Bitcoin for the first time this January.
Square's Bitcoin revenue from its Cash App surged 785% to $4.57 billion, or 48% of its top line, in 2020. That stunning growth offset its slower growth in transaction, subscription, and services revenue throughout the pandemic, and its total revenue more than doubled to $9.5 billion.
Square's higher dependence on lower-margin Bitcoin revenue during the pandemic squeezed its margins, but its other payment and seller services should recover after the crisis ends and stabilize its profits again. That's why analysts expect its revenue and earnings to both rise 45% this year.
But that bubble was a double-edged sword for NVIDIA: Its GPU sales initially surged as miners hoarded the cards, but the subsequent shortage of GPUs boosted market prices for its core market of PC gamers. After the bubble popped, the miners flooded the market with used GPUs -- which drove down prices and cannibalized NVIDIA's sales of new GPUs.
To avoid another cryptocurrency bubble, NVIDIA recently halved the hash rate, which gauges the efficiency of its GPUs in mining cryptocurrencies, for its newest RTX gaming GPUs.
It also launched a new line of CMPs (cryptocurrency mining processors) which are specifically designed for mining cryptocurrencies. That balanced approach could help NVIDIA profit from the growth of the cryptocurrency mining market while continuing to expand its core gaming business.
Analysts expect NVIDIA's revenue and earnings to rise 33% and 34%, respectively, this year as it sells more gaming and data center GPUs. The expansion of its new CMP business could complement that growth.
However, its automated system runs on blockchain, the same distributed ledger technology that powers cryptocurrency transactions. The combination of Lemonade's AI algorithms and its "smart contracts," which are stored within the blockchain, enables the company to ensure users within 90 seconds and process claims within three minutes.
Lemonade claims its platform represents "insurance built for the 21st century," and it's gaining a lot of momentum with younger users. The median age of its entry-level customer is about 30, and it currently offers home, renter's, life, and pet insurance policies. It ended 2020 with more than a million customers -- up from just 308,835 at the end of 2018.
Lemonade expects its gross earned premium (the percentage of the gross written premium it retains) to surge more than 70% this year. It isn't profitable yet, but it's incurring lower net losses on each plan.
Lemonade is still a speculative stock, and it's undeniably expensive at nearly 50 times this year's sales. However, investors looking for a disruptive company that runs on the same technology as Dogecoin and other cryptocurrencies should consider taking a sip of Lemonade.