One of the easiest investment plays of 2023 was buying Bitcoin (BTC +0.67%) mining stocks. All they seemed to do was go up, with popular mining stocks like Marathon Digital Holdings (MARA +0.14%), Riot Platforms (RIOT 3.44%), and CleanSpark (CLSK 1.33%) all up more than 400% by the end of 2023.
But it could be an entirely different story in 2024. Due to the upcoming Bitcoin halving, only a handful of Bitcoin mining companies are likely to be profitable for the year, and that could lead to a massive shakeout in the industry. So, with that in mind, here are two crypto stocks to buy instead.
Coinbase Global
First up is Coinbase Global (COIN 2.72%), which continues to be a favorite of crypto investors. Cathie Wood of Ark Invest was consistently bullish on Coinbase throughout 2023 -- and for good reason. Coinbase remains the second-largest cryptocurrency exchange in the world, with a business model that is easy to understand for investors.
Coinbase also remains one of the best indirect ways to get exposure to Bitcoin. Among publicly traded companies, Coinbase is the sixth-largest holder of Bitcoin in the world, with 9,181 bitcoins worth nearly $400 million on its balance sheet. Moreover, Bitcoin accounts for approximately one-third of all trading on the Coinbase platform. Generally speaking, upward momentum for Bitcoin also results in higher trading volume for other cryptos as well, so Coinbase could get a nice overall boost if investors return to the crypto market in 2024.
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The big question, of course, is what the new spot Bitcoin exchange-traded funds (ETFs) mean for the future of Coinbase. At year end, Ark Invest was selling off Coinbase stock, and some took that as a signal that it was time to get out of Coinbase. After all, if people were going to be buying Bitcoin indirectly via ETFs instead of directly via a crypto exchange, that would likely mean a direct hit to Coinbase's bottom line.
But if you take a closer look at the structure of the Bitcoin ETFs, Coinbase is designated as a custodian for 8 out of 11 of them. In other words, Coinbase is going to be holding onto a lot of Wall Street's Bitcoin in its digital vaults. In a best-case scenario, new custodial and service fees will help to patch over any loss in Bitcoin trading volume on its platform.
MicroStrategy
Next up is MicroStrategy (MSTR 1.78%), which continues to be the single-best Bitcoin proxy stock. If you take a quick look at how much Bitcoin that MicroStrategy is holding on its balance sheet, it's easy to see why. MicroStrategy now holds 189,150 Bitcoins worth nearly $8 billion at today's prices. For those of you keeping score at home, that's approximately 1% of the world's total Bitcoin supply.
CRYPTO: BTC
Key Data Points
As in the case of Coinbase, there's some debate about what the new Bitcoin ETFs will mean for MicroStrategy. Presumably, the company will lose some of its allure as a Bitcoin proxy stock. In just the first 48 hours after the new Bitcoin ETFs went live, the stock lost 20% of its value.
However, some of that appears to be an overreaction by the market. Investment giant Vanguard Group, for example, has said that it won't be making the new Bitcoin ETFs available for its client base. Instead, it will be investing heavily in MicroStrategy as a more efficient way to gain exposure to Bitcoin. That might sound counterintuitive at first until you consider that MicroStrategy's vast Bitcoin holdings are worth more than the company itself!
What is the best way to get exposure to Bitcoin?
Now is the time to get your Bitcoin exposure right, especially with the narrative around Bitcoin shifting. With that in mind, there are a variety of different ways to get access to Bitcoin. You can buy Bitcoin mining stocks. You can buy Bitcoin proxy stocks such as MicroStrategy. You can buy the new Bitcoin ETFs. Or you can buy Bitcoin directly via Coinbase.
Looking ahead, the next big catalyst to keep an eye on will be the Bitcoin halving, scheduled for April. Between now and then could be a fantastic opportunity to find crypto stocks such as Coinbase and MicroStrategy that are most likely to benefit from any long-term appreciation in the price of Bitcoin.
