The crypto markets have been hot this year, with Bitcoin (CRYPTO:BTC) already reached new all-time highs in March. One way for new investors to get into cryptocurrency is through exchange-traded funds (ETFs), as regulators had approved many spot Bitcoin ETFs earlier this year.
These ETFs track Bitcoin and offer investors direct insight into its price movements. This means that they do not necessarily offer you safer and less volatile options for investing in Bitcoin. You will still be vulnerable to sharp fluctuations in the crypto market.
Instead, you might consider investing in stocks that have a strong underlying business and exposure to Bitcoin. Two such examples are block (NYSE:SQ) And PayPal (NASDAQ:PYPL). For this reason, these may be better options for you than spot Bitcoin ETFs.
1. Block
Block, the company formerly known as Square, helps merchants easily process payments through its app and point-of-sale devices. Bitcoin was also an important part of his business.
Last year it was the company’s largest source of revenue; Bitcoin-related transactions brought in a whopping $9.5 billion in revenue, accounting for 43% of the company’s revenue ($21.9 billion). Block’s second largest source of revenue was its subscriptions and services, which generated $5.9 billion in revenue. Although Block does not generate high margins on Bitcoin transactions, the company still made a profit overall last year, with net income totaling $9.8 million.
The company’s Cash App allows people to easily buy and sell Bitcoin. And Block is going even deeper into the crypto world and plans to build its own Bitcoin mining system. In addition, the development of its own Bitcoin mining chip was recently completed.
For crypto investors, Block could be a safer investment in the long term than investing in spot Bitcoin ETFs. With a diversified and profitable business, it is easy to track the company’s performance and growth. It is a less speculative investment than cryptocurrencies can be. Although investors still face risks with the stock, it could represent a better overall investment option given the large role Bitcoin plays in Block’s operations.
The stock is currently trading at a price-to-earnings-growth (PEG) ratio of less than 0.9, suggesting that this could potentially be a cheap option for growth investors to hold onto for the long term.
2. PayPal
PayPal also allows users to buy and sell cryptocurrencies, but its operations are smaller and there is not an entire segment focused on Bitcoin-related revenue like Block. In this sense, PayPal could be an even safer option for investors. However, it is still clearly bullish on cryptocurrencies, having launched its own stablecoin, PayPal USD, which is said to be designed for payments.
Unlike Block, PayPal investors now expect consistent profits. The big downside for the company was simply that its growth rate was disappointing. But it is a pretty safe option for crypto enthusiasts.
The payment processing company reported earnings on Tuesday and revenue totaled $7.7 billion in the first three months of the year, up 9% from a year ago. Net income of $888 million also increased 12% compared to the same period last year.
PayPal is another decently valued stock as it trades at just 13 times its expected future earnings (based on analyst expectations) and its PEG ratio is around 0.6. Whether you’re looking for relatively safe exposure to cryptocurrencies or simply want to own a cheap growth stock, PayPal can be a great option for adding to your portfolio today.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Block and PayPal. The Motley Fool recommends the following options: short $67.50 June 2024 calls on PayPal. The Motley Fool has a disclosure policy.
Forget Spot Bitcoin ETFs: These 2 Stocks Offer Safer Ways to Invest in Crypto was originally published by The Motley Fool