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Yesterday, the Bitcoin price hit levels above $24,000, the highest price since last August. With some in the crypto space claiming that the worst is now in the past, investors are clearly getting excited again.
I’m primarily a stock investor. So should I start to invest in cryptocurrency stocks that are indirectly influenced by the movements of Bitcoin?
Benefiting from higher volatility
One type of stock I could consider is a crypto exchange platform. A good example here is Coinbase Global (NASDAQ:COIN). The business is one of the largest trading platforms in the world for Bitcoin and other major coins. It makes revenue whenever a user buys or sells. So in reality, Coinbase becomes more profitable when there’s a jump in volatility. This causes higher trading volumes and number of transactions, earning more fees in the process.
Given the renewed interest in crypto over the past month due to the strong rally, I’d expect Q1 to show higher volumes for Coinbase. However, if I wait until the results get released, I’ll probably have missed the boat. In fact, the share price is up 135% just over the past month alone.
The stock is still down 55% over the past year, so there could be further upside to benefit from. Yet in the short term, I feel that I’ve missed my opportunity here.
A UK-listed option
Another possible angle is to revisit one of the most popular UK-listed crypto stocks, namely Argo Blockchain. Back in early 2021, the crypto-mining company came into the limelight. The stock jumped 20 times in a matter of a few months as the Bitcoin price soared to new all-time highs.
Since then, the story has changed. The share price dropped from being above 200p in April 2021 to 16p at the moment. It’s down 78% over the past year.
Financially, the business has still been performing well. The H1 2022 results noted that the total number of Bitcoin and equivalents mined during the period was 939, a 6% increase from the same period the year before. Yet due to the fall in the value of these coins, the actual revenue derived from this fell. It pushed the business to a pre-tax loss of £36.9m.
In a similar way to Coinbase, the stock has jumped 99% in the past month, reflecting the change in sentiment across the market.
My thoughts from here
The rally in the Bitcoin price has been remarkable. Yet I don’t feel that comfortable that it’s supported by a true change in the wind. The fallout from different exchanges going bust is still fresh and highlights the risks involved in this unregulated space.
I also feel that I’m a little late to the party on this move, shown by the jump in recent weeks on Coinbase and Argo Blockchain. With all that in mind, I’d rather avoid investing simply due to the fear-of-missing-out (FOMO) on further gains. Instead, I’ll be patient and keep both stocks on my watchlist for future opportunities.
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