The crypto markets have been hot this year, with Bitcoin (BTC +5.41%) reaching new all-time highs back in March. One way new investors have been gaining exposure to the cryptocurrency is through exchange-traded funds (ETFs), as earlier in the year, regulators approved many spot Bitcoin ETFs.
These ETFs track Bitcoin and give investors direct exposure to its price movements. That means that they aren't necessarily going to provide you with safer, less volatile options for investing in Bitcoin. You will still be vulnerable to wild swings in the crypto market.
Instead, you may want to consider investing in stocks that have strong underlying businesses and exposure to Bitcoin. Two such examples are Block (SQ +3.25%) and PayPal (PYPL +5.06%). Here's why these might be better options for you than spot Bitcoin ETFs.
NYSE: SQ
Key Data Points
1. Block
Block, the company formerly known as Square, helps merchants process payments easily using its app and point-of-sale devices. Bitcoin has also been a key part of its business.
Last year, it was the company's largest source of revenue; Bitcoin-related transactions brought in a whopping $9.5 billion in sales, representing 43% of the company's top line ($21.9 billion). Block's next-largest source of revenue was from its subscriptions and services, which generated $5.9 billion in sales. While Block doesn't generate strong margins on Bitcoin transactions, the company still posted a profit overall last year with net income totaling $9.8 million.
The company's Cash App makes it easy for people to buy and sell Bitcoin. And Block is going even deeper into crypto as it plans to build its own Bitcoin mining system. It also recently finished developing its own Bitcoin mining chip.
For crypto investors, Block may be a safer long-term play than investing in spot Bitcoin ETFs. With a diversified and profitable business, it's easy to track the company's performance and growth; it's a less speculative investment than crypto can be. While investors will still face risks with the stock, given how much of a factor Bitcoin plays in Block's operations, it could make for a better overall investment option.
The stock currently trades at a price-to-earnings-growth (PEG) ratio of less than 0.9, suggesting that this could possibly be a cheap option for growth investors to hang onto for the long haul.
NASDAQ: PYPL
Key Data Points
2. PayPal
PayPal also allows users to buy and sell crypto, but its operations are smaller, and it doesn't have an entire segment devoted to Bitcoin-related revenue the way Block does. In that sense, PayPal may be an even safer option for investors. However, it is still clearly bullish on crypto, as it has launched its own stablecoin, PayPal USD, which it says is designed for payments.
Unlike with Block, investors have come to expect consistent profits from PayPal. The big knock on the business has been simply that its growth rate has been underwhelming. But it's a fairly safe option for crypto enthusiasts.
The payment processing company released its earnings on Tuesday and its revenue for the first three months of the year totaled $7.7 billion, rising by 9% year over year. Net income of $888 million also increased by 12% when compared to the same period last year.
PayPal is another decently valued stock, as it trades at only 13 times its expected future profits (based on analyst expectations) and its PEG ratio is around 0.6. Whether you want some relatively safe exposure to crypto or just want a cheap growth stock to own, PayPal can be an excellent option to add to your portfolio today.
