Currently trading near an all-time-high, Bitcoin (BTC -1.82%) continues to lead the crypto market higher. As a result, analysts and investors continue to ratchet up their price estimates for just how much higher Bitcoin might go. One of the most aggressive price forecasts comes from Cathie Wood's Ark Invest, which has detailed a scenario in which Bitcoin might surge past the $2 million mark by the year 2030.
If that turns out to be true, people will be kicking themselves for not getting in on stocks whose success is massively tied to the price of Bitcoin. The two that I'm watching right now are MicroStrategy (MSTR 3.38%) and Coinbase Global (COIN 5.68%).
MicroStrategy
For the past year, investors have viewed MicroStrategy as a proxy stock for investing in Bitcoin. That's because MicroStrategy currently has the largest Bitcoin holdings of any publicly traded company in the entire world. Right now, the company has 193,000 Bitcoins on its balance sheet, worth an estimated $13 billion at today's market prices. By way of comparison, the total stock market capitalization of MicroStrategy is $21 billion.
And, if anything, this extremely leveraged Bitcoin position is only going to grow over the next few years as the company just announced a massive new $700 million convertible note offering. The purpose of the new offering is mind-numbingly simple: to buy more Bitcoin. So get ready to hear more from MicroStrategy about its all-in Bitcoin strategy. Already, its aggressive Bitcoin strategy has pushed up the company's stock price to a 24-year high.
The only caveat here, of course, is that the company could reach a point where it simply has too much Bitcoin on its balance sheet. If the price of Bitcoin were to decline significantly for a long period of time, then the valuation of MicroStrategy might nosedive.
For that reason, I'd like to see MicroStrategy continue to build out its core software business over the coming years. The company has hinted that new AI-related software offerings might be on the way. This would help to provide at least some diversification and alleviate the risk of having the company's Bitcoin holdings worth more than one-half the value of the company itself.
Coinbase Global
The price of Coinbase Global stock, too, is leveraged to the price of Bitcoin, but not nearly to the same degree as MicroStrategy. From my perspective, Coinbase is much more of a bet on the future direction of the crypto market, and not just on the future trajectory of Bitcoin.
That being said, the core element of Coinbase's business model -- investors making trades on its crypto trading platform -- has been boosted significantly by the recent price action in Bitcoin. With Bitcoin pushing all-time highs, retail investors have been lured back into the crypto market. Bitcoin accounts for more than one-quarter of all trading volume on the Coinbase platform, so this is a welcome development. Presumably, an expanding bull market rally would drive trading in other cryptocurrencies as well.
Image source: Getty Images.
At the same time, Coinbase is an indirect beneficiary of the new spot Bitcoin ETFs. That's because Coinbase is a custodian for many of the new ETFs, including the highly successful ones launched by BlackRock and Ark Invest. This new custodial fee income is going to boost Coinbase's subscription and services revenue. Over time, this will help to level out the company's revenue during rough market patches.
This nontrading-related revenue is actually a fast-growing category for Coinbase, and also includes stablecoin revenue and blockchain rewards revenue. This is why I think Coinbase is really a play on the growth of the entire crypto and blockchain space, and not just Bitcoin.
What happens through 2030?
Keep in mind that it's impossible to predict exactly what will happen in the crypto market over the next nearly seven years. There's too much uncertainty when it comes to the regulatory environment, and the crypto asset class has historically been extremely volatile.
But it is possible to piece together key trends and milestones that are likely to push crypto stocks higher. If both retail and institutional investors continue to allocate more of their portfolios to Bitcoin, that's good news for crypto stocks. And if the Securities and Exchange Commission continues to approve new crypto investment products, that would also be a positive development.
As long as Bitcoin remains one of the top-performing assets, it's highly likely that crypto stocks such as MicroStrategy and Coinbase Global will go along for the ride.
