Some investors might be intrigued by cryptocurrencies but reluctant to buy any of the volatile coins. For those investors, publicly traded companies that provide some exposure to cryptocurrencies might seem like better investments.

Coinbase (COIN 0.51%) and Marathon Digital (MARA 1.03%) are two such stocks. Coinbase owns the largest cryptocurrency exchange in the United States with 8.8 million monthly transacting users (MTUs), while Marathon Digital mines Bitcoin (BTC -0.16%) with over 22,000 miners.

Coinbase went public via a direct listing this April with a reference price of $250, but regulatory concerns recently caused its price to dip below that level. Meanwhile, Marathon's stock skyrocketed roughly 1,650% higher over the past 12 months as it transitioned from a patent-holding business to a bitcoin-mining company. So which of these volatile cryptocurrency stocks is a better investment right now?

Golden Bitcoin tokens on a shiny circuit board.

Image source: Getty Images.

Coinbase is still growing like a weed

Coinbase's revenue jumped 144% to $1.28 billion in 2020, then surged 969% year-over-year to $4.03 billion in the first half of 2021. It turned profitable in 2020 with a net profit of $322 million, and it stayed in the black with a whopping net profit of $2.37 billion in the first six months of 2021.

Coinbase's trading volume increased 142% to $193 billion in 2020, then accelerated to $335 billion and $462 billion in the first and second quarters of 2021, respectively. Roughly half of its trading volume came from Bitcoin and Ethereum (ETH 0.02%) in the second quarter. It ended 2020 with 2.8 million MTUs, but its user base expanded to 8.8 million MTUs in the second quarter of 2021.

Analysts expect Coinbase's revenue to surge 433% to $6.8 billion this year, while its adjusted EPS should increase 676%. Of course, investors should be skeptical of those estimates since they're pinned to unpredictable cryptocurrency prices, but they make the stock look surprisingly cheap at 44 times forward earnings and nine times this year's sales.

However, several concerns are weighing down Coinbase's stock. First, the Securities and Exchange Commission (SEC) recently threatened to sue Coinbase if it proceeded with its planned launch of Lend, a feature that would allow its users to lend out their USD Coins (a digital stablecoin pinned to the U.S. dollar) to earn interest. That threat suggests the SEC could scrutinize Coinbase's other features.

Second, Coinbase recently boosted the size of its new debt offering from $1.5 billion to $2 billion. Those bonds, which are rated as "junk" by S&P Global, will be issued in two tranches: one which matures in Oct. 2028 with a coupon of 3.375%, and another which matures in Oct. 2031 with a coupon of 3.625%. Coinbase's long-term debt balance stood at $1.5 billion at the end of June, so the company is more than doubling its debt load at high interest rates. Those interest expenses could hurt Coinbase if cryptocurrency prices stall out or decline.

Marathon continues to mine more bitcoins

Marathon generated just $4.4 million in revenue with a net loss of $10.4 million in 2020. But in the first half of 2021, its revenue skyrocketed 4,279% year-over-year to $38.5 million as it expanded its fleet of bitcoin miners and mined more bitcoins.

However, Marathon's net loss also widened year-over-year, from $3.2 million to $25.5 million, due to the rising costs of acquiring more miners and running those machines. 

At the end of 2020, Marathon only held 126 bitcoins. But at the beginning of 2021, it purchased 4,813 bitcoins for $150 million at an average price of $31,168 -- which is well below its current price of about $48,000. In addition, Marathon's own miners minted more bitcoins throughout the year, and its total number of bitcoins rose to 6,695 -- which have a current market value of approximately $320 million -- by the end of August.

Marathon expects its fleet of Bitmain's top-tier ASIC miners to expand from 22,412 at the beginning of September to 133,000 by mid-2022. That order has already been placed, but it could be disrupted by new cryptocurrency restrictions against Bitmain in its home market of China. Bitmain suspended all of its outgoing shipments in June, but Marathon still expects its entire order of ASIC miners to be filled.

Analysts expect Marathon's revenue to increase 5,189% to $230.4 million this year, then rise 204% to $700.8 million next year. Based on those expectations, Marathon's stock trades at 16 times this year's sales and just five times next year's sales. Those valuations might seem low relative to its growth rates, but they're completely pinned to bitcoin's price and its ability to secure new ASIC miners from Bitmain.

The winner: Coinbase

Both of these stocks are risky all-in bets on cryptocurrencies. Still, Coinbase is a better investment than Marathon for four simple reasons: It isn't engaged in the capital-intensive mining process, it's consistently profitable, it offers a diverse range of cryptocurrencies, and its stock is cheaper. The regulatory headwinds are worth watching, but I personally doubt the SEC will ever ban Coinbase's core platform.