We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Focus on These 5 Crypto Stocks for Long-Term Gains
Read MoreHide Full Article
The cryptocurrency market regained its lost glory this year. The last year was a disappointing one as the Fed pursued aggressive monetary control with a massive hike in the benchmark lending rate to combat 40-year high inflation.
A high interest rate is detrimental to growth assets like technology stocks, consumer discretionary stocks and cryptocurrencies. Tighter monetary control also raised concern that the economy may fall into a recession in the near future. Moreover, a series of unfortunate events — mainly the Terra Luna crash and a major fraud leading to the bankruptcy of FTX — also dented market participants’ confidence in digital currency like crypto.
The situation reversed this year buoyed by a favorable macro-economic scenario. The Fed reduced the magnitude of interest rate hikes as inflation dropped steadily. Importantly, in spite of facing tighter monetary control in the past one and a half years, the fundamentals of the U.S. economy remain solid. This evaporated the concern of a near-term recession.
Finally, the largest thrust for the crypto space has come from institutional investors. BlackRock Inc.’s (BLK) decision to launch a Bitcoin ETF and the decision of The Charles Schwab Corp. (SCHW)-led consortium to create a new crypto exchange called EDX Markets, have attracted several investors toward cryptocurrencies like Bitcoin, Ethereum and Litecoin to name a few.
Headwinds Persist
Despite the above-mentioned tailwinds, the economy is not completely out of the woods. The Fed paused rate hikes in its June FOMC meeting after 10 consecutive increases. However, Fed Chairman Jerome Powell has warned that more rate hikes are likely this year as inflation remains elevated, much higher than the central bank’s 2% target.
The minutes of the June FOMC meeting showed that Fed members unanimously opined for more rate hike going forward as the inflation rate remains elevated. The June FOMC dot-plot showed that most members were expecting two more rate hikes of 25 basis points each by the end of this year.
For example, in the initial hours of trading on Jul 6, the price of Bitcoin touched a 13-month high of $31,450, primarily due to soaring demand from institutional investors. However, extremely strong private sector payroll data for June released by Automatic Data Processing, Inc. (ADP) changed the whole scenario.
Market participants unanimously infer that a tight labor market — currently the sole concern of the Fed — will compel the central bank to hike rate again. The CME FedWatch is currently showing a 92.5% probability of a 25-basis point interest rate hike in the July FOMC meeting. Consequently, Bitcoin lost its momentum and fell more than 1% from its peak.
Long-Term Gains in View
At this stage, investors should think from a long-term perspective. Despite more rate hike warnings, the Fed is undoubtedly approaching the end of the higher rate regime. We may not see any rate hike in 2024 and may witness a rate cut at the end of next year if macro-economic data remains favorable.
Therefore, investors should accumulate cryptocurrencies using a buy-on-the-dip strategy. Every dip in crypto prices will be a good purchasing point in order to gain handsomely once the Fed’s tighter monetary control comes to an end.
Our Stock Selection
We have narrowed our search to five stocks with solid crypto exposure and strong growth potential.
PayPal Holdings Inc. (PYPL - Free Report) operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. PYPL’s mobile wallet Venmo also allows users to buy and sell cryptocurrency.
PayPal has an expected earnings growth rate of 19.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. The stock currently carries a Zacks Rank #3 (Hold).
Block Inc. (SQ - Free Report) is an online digital and mobile payment platform for consumers and merchants and is the parent company of Square and Cash App. The users of Cash App can buy, sell, send and receive Bitcoin. In addition, SQ’s decentralized tbd platform allows developers to build decentralized finance applications to run on programmable blockchains. SQ is also one of the largest Bitcoin investors.
Block has an expected earnings growth rate of 69% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days. The stock currently carries a Zacks Rank #3.
Robinhood Markets Inc. (HOOD - Free Report) operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin, and other cryptocurrencies using its Robinhood Crypto platform.
Robinhood Markets has an expected earnings growth rate of 47% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 30 days. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coinbase Global Inc. (COIN - Free Report) provides financial infrastructure and technology for the crypto economy in the United States and internationally. COIN offers the primary financial account in the crypto space for consumers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions; and technology and services that enable developers to build crypto-based applications and securely accept crypto assets as payment.
Coinbase Global has an expected earnings growth rate of 79.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 35.4% over the past 60 days. The stock currently carries a Zacks Rank #3.
MicroStrategy Inc. (MSTR - Free Report) currently holds around $4 billion worth of Bitcoins. MSTR provides a unique business model focused on the acquisition and holding of bitcoins. MSTR is the first publicly-traded company to buy Bitcoin and has become an important indirect player for Bitcoin.
MicroStrategy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 90 days. The stock currently carries a Zacks Rank #3.
The chart below shows the price performance of the above-mentioned five stocks in the past three months.
Image Source: Zacks Investment Research
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Focus on These 5 Crypto Stocks for Long-Term Gains
The cryptocurrency market regained its lost glory this year. The last year was a disappointing one as the Fed pursued aggressive monetary control with a massive hike in the benchmark lending rate to combat 40-year high inflation.
A high interest rate is detrimental to growth assets like technology stocks, consumer discretionary stocks and cryptocurrencies. Tighter monetary control also raised concern that the economy may fall into a recession in the near future. Moreover, a series of unfortunate events — mainly the Terra Luna crash and a major fraud leading to the bankruptcy of FTX — also dented market participants’ confidence in digital currency like crypto.
The situation reversed this year buoyed by a favorable macro-economic scenario. The Fed reduced the magnitude of interest rate hikes as inflation dropped steadily. Importantly, in spite of facing tighter monetary control in the past one and a half years, the fundamentals of the U.S. economy remain solid. This evaporated the concern of a near-term recession.
Finally, the largest thrust for the crypto space has come from institutional investors. BlackRock Inc.’s (BLK) decision to launch a Bitcoin ETF and the decision of The Charles Schwab Corp. (SCHW)-led consortium to create a new crypto exchange called EDX Markets, have attracted several investors toward cryptocurrencies like Bitcoin, Ethereum and Litecoin to name a few.
Headwinds Persist
Despite the above-mentioned tailwinds, the economy is not completely out of the woods. The Fed paused rate hikes in its June FOMC meeting after 10 consecutive increases. However, Fed Chairman Jerome Powell has warned that more rate hikes are likely this year as inflation remains elevated, much higher than the central bank’s 2% target.
The minutes of the June FOMC meeting showed that Fed members unanimously opined for more rate hike going forward as the inflation rate remains elevated. The June FOMC dot-plot showed that most members were expecting two more rate hikes of 25 basis points each by the end of this year.
For example, in the initial hours of trading on Jul 6, the price of Bitcoin touched a 13-month high of $31,450, primarily due to soaring demand from institutional investors. However, extremely strong private sector payroll data for June released by Automatic Data Processing, Inc. (ADP) changed the whole scenario.
Market participants unanimously infer that a tight labor market — currently the sole concern of the Fed — will compel the central bank to hike rate again. The CME FedWatch is currently showing a 92.5% probability of a 25-basis point interest rate hike in the July FOMC meeting. Consequently, Bitcoin lost its momentum and fell more than 1% from its peak.
Long-Term Gains in View
At this stage, investors should think from a long-term perspective. Despite more rate hike warnings, the Fed is undoubtedly approaching the end of the higher rate regime. We may not see any rate hike in 2024 and may witness a rate cut at the end of next year if macro-economic data remains favorable.
Therefore, investors should accumulate cryptocurrencies using a buy-on-the-dip strategy. Every dip in crypto prices will be a good purchasing point in order to gain handsomely once the Fed’s tighter monetary control comes to an end.
Our Stock Selection
We have narrowed our search to five stocks with solid crypto exposure and strong growth potential.
PayPal Holdings Inc. (PYPL - Free Report) operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. PYPL’s mobile wallet Venmo also allows users to buy and sell cryptocurrency.
PayPal has an expected earnings growth rate of 19.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. The stock currently carries a Zacks Rank #3 (Hold).
Block Inc. (SQ - Free Report) is an online digital and mobile payment platform for consumers and merchants and is the parent company of Square and Cash App. The users of Cash App can buy, sell, send and receive Bitcoin. In addition, SQ’s decentralized tbd platform allows developers to build decentralized finance applications to run on programmable blockchains. SQ is also one of the largest Bitcoin investors.
Block has an expected earnings growth rate of 69% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days. The stock currently carries a Zacks Rank #3.
Robinhood Markets Inc. (HOOD - Free Report) operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin, and other cryptocurrencies using its Robinhood Crypto platform.
Robinhood Markets has an expected earnings growth rate of 47% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 30 days. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coinbase Global Inc. (COIN - Free Report) provides financial infrastructure and technology for the crypto economy in the United States and internationally. COIN offers the primary financial account in the crypto space for consumers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions; and technology and services that enable developers to build crypto-based applications and securely accept crypto assets as payment.
Coinbase Global has an expected earnings growth rate of 79.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 35.4% over the past 60 days. The stock currently carries a Zacks Rank #3.
MicroStrategy Inc. (MSTR - Free Report) currently holds around $4 billion worth of Bitcoins. MSTR provides a unique business model focused on the acquisition and holding of bitcoins. MSTR is the first publicly-traded company to buy Bitcoin and has become an important indirect player for Bitcoin.
MicroStrategy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 90 days. The stock currently carries a Zacks Rank #3.
The chart below shows the price performance of the above-mentioned five stocks in the past three months.
Image Source: Zacks Investment Research