The cryptocurrency market cooled in 2022 as rising interest rates, regulatory challenges and other macroeconomic headwinds pushed investors toward more conservative investments. But last year the crypto market got back on track when the US Securities and Exchange Commission (SEC) approved the first spot price Bitcoin Exchange traded funds (ETFs) and investors were looking forward to lower interest rates.
Bitcoin’s upcoming “halving,” which will reduce rewards for mining the cryptocurrency; Network upgrades for the ether Network; and more institutional cryptocurrency purchases also brought more bulls back.
The easiest way to benefit from market growth is to buy top cryptocurrencies like Bitcoin and Ethereum directly from a cryptocurrency exchange. But it’s still smart to invest in a few promising crypto companies that will benefit from the same tailwinds. I believe Marathon Digital (NASDAQ:MARA) And Coinbase Global (NASDAQ:COIN) Check all the correct boxes.
1. Marathon Digital
Marathon Digital is North America’s largest pure-play Bitcoin miner. In 2023, 12,852 Bitcoins were minted, a 210% increase over 2022. At the end of March, the company held 17,381 Bitcoins within its total Bitcoin and cash holdings of $1.6 billion.
Marathon’s North Dakota mining operations were impacted by adverse weather conditions in the first quarter of 2024. However, the company plans to address these issues by moving some of its miners from North Dakota to Texas and powering thousands of new miners. Following these changes, the operational fleet is expected to grow to 235,000 miners this year with a total production capacity of 29.8 exahashes per second (EH/s). In comparison, Marathon’s biggest competitor is, Riot Platformsended March with 112,944 miners, a production capacity of 8.6 EH/s and only 8,490 Bitcoins on the balance sheet.
Marathon’s lead over Riot is likely to widen as the company opens new factories, acquires smaller miners and expands its new mining joint venture in Abu Dhabi. The company also regularly sells its own Bitcoin to raise more money and support these expansion plans.
Analysts expect Marathon’s revenue to grow at a compound annual growth rate (CAGR) of 35% from 2023 to 2026. They expect adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to grow at a slower annual growth rate (CAGR) of 1%. It is increasing its expenses to grow its business, but its stock appears to be trading at six times this year’s Sales and 13 times its adjusted EBITDA are still reasonably valued.
2. Coinbase Global
Coinbase is one of the world’s largest cryptocurrency exchanges. The company had $101 billion in assets under custody at the end of 2023 and was selected as custodian for eight of the 11 new Bitcoin spot price ETFs that went public earlier this year. It thrived even when many of its industry peers collapsed.
Coinbase’s total trading volume fell 44% in 2023, but improved sequentially in the third and fourth quarters as the crypto market warmed up again. It has also derived a larger portion of its trading revenue from it Connection stablecoin – which accounted for 11% of its trading volume in 2023 – and this shift could reduce its long-term dependence on Bitcoin, Ethereum and its other more volatile crypto assets.
From 2023 to 2026, analysts expect Coinbase’s revenue to grow at a CAGR of 21%, while its Adjusted EBITDA grows at a CAGR of 40%. Based on these estimates, the company’s stock trades at 10 times this year’s revenue and 24 times adjusted EBITDA.
Coinbase stock isn’t a bargain yet, but it could still have plenty of room to run as the cryptocurrency market grows. That’s why Ark Invest’s Cathie Wood – who believes Bitcoin price can reach $1.5 million within the next three years – has Coinbase as a top holding in several of Ark Invest’s most popular ETFs. If you think cryptocurrencies will gain more attention from retail and institutional investors, you should follow Ark’s lead and pick up some shares of Coinbase.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
“2 Potentially Explosive Crypto Stocks to Buy in April” was originally published by The Motley Fool