The crypto market was chilled by high interest rates in 2022 and 2023, but it's been warming up again this year. Bitcoin's (BTC -1.75%) price has soared nearly 50% year to date as U.S. regulators approved the first spot price exchange-traded funds (ETFs) and investors looked toward the upcoming halving, which will slow Bitcoin's supply growth this year. Ethereum's (ETH 0.23%) price has risen more than 40% on hopes that regulators will also approve its spot price ETFs as the Ethereum network undergoes another update.
That recovery has driven many investors back toward crypto-related stocks like Coinbase Global (COIN 5.68%), Marathon Digital (MARA 2.21%), and MicroStrategy (MSTR 3.38%). All three stocks represent simple ways to profit from the expansion of the crypto market, and they could rally much higher by the end of the decade.
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1. Coinbase Global
Coinbase is one of the world's largest cryptocurrency exchanges. In 2023, it generated 34% of its trading volume from Bitcoin, 20% from Ethereum, 11% from the Tether (USDT -0.02%) stablecoin, and the rest from other types of crypto assets. That diversification makes it a great way to profit from the long-term expansion of the crypto market.
Coinbase suffered a major slowdown during the past two years as rising interest rates drove investors away from cryptocurrencies and other speculative investments. But looking ahead, the soaring prices of Bitcoin and Ethereum during the past few months will likely bring back more retail investors and light a blazing fire under its business again.
From 2023 to 2026, analysts expect Coinbase's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to both grow at a compound annual growth rate (CAGR) of 9%. Based on those estimates, Coinbase's stock looks reasonably valued at 26 times this year's adjusted EBITDA.
Yet those forecasts seem too conservative if you believe Bitcoin, Ethereum, and other top cryptocurrencies will soar to new heights. If that best-case scenario plays out, Coinbase could easily beat those estimates and outperform the market through 2030.
2. Marathon Digital
Marathon is the world's largest pure-play Bitcoin miner. It minted a record 12,852 bitcoins in 2023, representing a 210% increase from 2022, while its energized hash rate (which gauges its total mining power) rose 253%. It periodically sells its mined Bitcoin to raise more cash, but it still ended the year with 15,126 bitcoins (worth $947 million as of this writing) and $357 million in cash and cash equivalents on its balance sheet.
Marathon could consolidate the Bitcoin mining market in the near future. During the past year, it already opened two new plants, launched a mining joint venture in Abu Dhabi, and agreed to buy several other mining sites. Therefore, I wouldn't be too surprised if it tries to buy its closest competitor Riot Platforms (RIOT -1.49%).
Bitcoin will become increasingly difficult to mine with each halving, which reduces the rewards for mining the crypto in half every four years, but Marathon could offset that pressure with economies of scale by expanding its mining operations and diluting its expenses. Analysts expect its revenue to grow at a CAGR of 48% from 2023 to 2025 -- and it could grow even faster through the end of the decade if Bitcoin's price skyrockets and it takes over its top competitors.
3. MicroStrategy
MicroStrategy was once considered a slow-growth enterprise software stock. That all changed when the company started to make large purchases of Bitcoin during the past 3 1/2 years. The company ended 2023 with 189,150 bitcoins on its balance sheet, with a market value of about $11.9 billion. That's nearly two-thirds of its enterprise value of $18.5 billion, and it plans to keep buying Bitcoin for the foreseeable future.
As MicroStrategy hoards more Bitcoin, it's gradually expanding its subscription-based analytics services to offset its declining license and support revenue. The bulls believe that over the long term, MicroStrategy's software business will stabilize as its Bitcoin investments pay off.
So just like Coinbase and Marathon, MicroStrategy represents an easy way to profit from Bitcoin's rising price without directly buying the cryptocurrency. The company could also sell some of its Bitcoin to reduce its debt and expand its software ecosystem with big investments and acquisitions. If it plays all of those cards right, it could easily outperform the market by 2030.
