These 2 Stocks Might Be The Best Way To Ride The Rise In Bitcoin

 

As bitcoin climbs higher, these 2 stocks look like a good bet for investors wanting indirect exposure to the digital coin. 

Bitcoin has been on a tear recently.

On Tuesday, the cryptocurrency rose as high as $19,392, putting it within striking distance of its all-time high of $19,665 set back in December 2017.

Bitcoin is up more than 166% year-to-date, and has been pushed higher by bullish sentiment tied in part to more institutional interest in the coin.

In particular, two fintech companies are fueling demand for the coin as they open the floodgates for millions of users to trade it: PayPal (NASDAQ: PYPL) and Square (NYSE: SQ). 

Hedge Fund Pantera Capital estimates that the two firms’ clients have been buying the majority of the new bitcoin supply entering the market, with Square users accounting for 40% of bitcoin entering the market.

And PayPal could be responsible for even more demand since launching its service where users can buy, hold, and sell cryptocurrencies late last month.

Pantera estimates that since its launch, PayPal users are already buying roughly 70% of the new supply of bitcoin.

“It’s having a significant increase on price,” said Dan Morehead, founder and chief investment officer of Pantera Capital. “You bring on two corporates that are already buying all of the newly issued bitcoins – supply and demand says the price has to go up.”

Both stocks have been pushed far higher this year, with PayPal up more than 90% year-to-date and Square up a whopping 224% so far this year. 

Square is up nearly 19% over the last month alone, driven higher by a massive earnings beat, thanks in part to a surge in bitcoin transactions via its Cash app last quarter. 

“Square managed to beat by a mile,” said MoffettNathanson analyst Lisa Ellis, who added that gross quarterly profits from the Cash app were three times higher than a year earlier. Square buys bitcoin and resells it to Cash app customers, while taking a cut like a broker. The company said its bitcoin revenue was around $1.63 billion, while its costs from bitcoin were $1.6 billion with the difference being gross profit. 

The payments company’s bitcoin revenue and profit depend on the fluctuating price of the cryptocurrency, along with trading volume. So Square benefits when bitcoin prices rise and volume increases.

As for PayPal, it now allows users to buy and sell bitcoin, and said that starting in 2021, users will be able to use bitcoin to buy from the 26 million stores that are signed up with the company. 

Galaxy Digital Holdings said PayPal’s bitcoin move was “the biggest news of the year in crypto” in a tweet. “All banks will now be on a race to service crypto. We have crossed the rubicon.”

The move might be even more beneficial for PayPal, however. The company said it won’t charge fees or otherwise make money off bitcoin buying and selling this year, but will start charging “a transaction fee depending on the amount of crypto you buy/sell” in 2021.

This means PayPal won’t hold bitcoin on its own balance sheet. 

But for PayPal, adding bitcoin will keep its users engaged, argues Wolfe Research analyst Darrin Peller, who said bitcoin adoption “can drive a lot more engagement and user interactions for the likes of PayPal.”

 
Trending Ideas

Featured Stocks On The Move

Daily Rundown

Top 3 Stocks in Leading Sectors
  • 3 Audio & Video Product Stocks To Buy Now

    Koss Corporation (KOSS) Koss Corporation designs and manufactures high-quality headphones, focusing on delivering superior sound performance. The company offers a range of products catering to audiophiles, professionals, and everyday users,... Read More

  • 3 Software Stocks To Buy Now

    Similarweb Ltd. (SMWB) Similarweb Ltd. provides a digital intelligence platform that offers insights into web traffic, online performance, and market trends. Businesses use its tools to optimize their online presence,... Read More

  • 3 Financial Transaction Service Stocks To Buy Now

    Global Blue Group Holding AG (GB) Global Blue Group Holding AG specializes in providing tax-free shopping and payment services for international shoppers. The company facilitates smooth refund processes and innovative... Read More

  • 3 Medical Stocks To Buy Now

    Qudian Inc. (QDDEL) Qudian Inc. operates a consumer finance platform in China, providing small loans and credit products to underserved consumers. The company leverages data analytics and technology to streamline... Read More

  • 3 Electric Power Stocks To Buy Now

    Empresa Distribuidora y Comercializadora Norte S.A. (EDN) Empresa Distribuidora y Comercializadora Norte S.A. (EDN) distributes electricity to Argentina’s Buenos Aires region. The company focuses on reliable energy supply, infrastructure upgrades,... Read More

  • 3 Investment Brokerage Stocks To Buy Now

    Robinhood Markets, Inc. (HOOD) Robinhood Markets, Inc. operates a financial services platform offering commission-free trading in stocks, ETFs, and cryptocurrencies. Known for its user-friendly mobile app, the company focuses on... Read More

  • 3 Consumer Service Stocks To Buy Now

    FAT Brands Inc. (FAT) FAT Brands Inc. is a global franchising company that develops and manages a portfolio of fast-casual and casual dining restaurant brands. Known for its diverse offerings,... Read More

  • 3 Safety Stocks To Buy Now

    Digimarc Corporation (DMRC) Digimarc Corporation develops innovative digital watermarking and content identification technologies. Its solutions enhance product packaging, digital media, and supply chain transparency, providing companies with tools for brand... Read More