UKRAINE – 2021/03/23: In this photo illustration the stock market information of Advanced Micro … [+]
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Cryptocurrencies have seen a lot of volatility in recent weeks. Bellweather crypto, Bitcoin, has seen prices plummet by almost 10% year-to-date, to levels of about $43,000 currently, and also remains down by almost 33% from all-time highs seen in November 2021. The decline is likely driven by expectations of tighter U.S. monetary policy as the Federal Reserve plans multiple rate hikes for this year, as inflation soars to near 40-year highs. Moreover, the recent uncertainty following the surge in Covid-19 cases (U.S. daily cases averaged over 800,000 last week), amid the spread of the highly infectious omicron coronavirus variant, is also adding to the negative sentiment.
Our theme of Cryptocurrency Stocks which includes semiconductors, payments, and brokerage companies, enables investors to gain exposure to the cryptocurrency value chain without betting on the volatile cryptocurrencies themselves. Although the theme remains down by about 8% thus far in 2022, compared to the S&P 500 which is down by about 2% over the same period, it fared very well through the Covid-19 pandemic, returning about 192% in 2020 and about 25% in 2021. The theme has also been much less volatile over time, with average drawdowns over the last five years standing at just about -10%, compared to drawdowns on the S&P 500 which have averaged around -15%.
Within our theme, semiconductor major Advanced Micro Devices has been the strongest performer in recent quarters, with its stock rising by about 55% over the last 12 months. On the other side, digital payments player PayPal has been the worst performer, with its stock down by about 26% over the last 12 months.
Below you’ll find our previous coverage of the cryptocurrency theme where you can track our view over time.
[10/15/2021] With Bitcoin At $60K, Consider These Crypto Stocks
Bitcoin prices have rallied by almost 25% over the last month, trading at about $59,600 as of late Thursday. The bellwether crypto has rallied from lows of under $30,000 in July. There are likely a couple of factors driving the recent gains. Firstly, there has been some anticipation that a Bitcoin futures ETF could be approved by the U.S. Securities and Exchange Commission shortly. Moreover, the chairman of the Federal Reserve clarified that he has no intention to ban cryptocurrencies in the U.S, easing concerns in the market following China’s recent crackdown on cryptocurrency. However, despite the recent rally, Bitcoin and other cryptocurrency assets have proved very volatile.
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Investors looking to play the long-term upside in cryptocurrency adoption, without exposing themselves to the big swings in the crypto market, should take a look at our indicative theme on Cryptocurrency Stocks which includes semiconductors, payments, and brokerage companies that have exposure to the cryptocurrency value chain. The theme has gained a solid 30% year-to-date, compared to the S&P 500 which is up by about 18% over the same period. The theme has also been less volatile, with maximum drawdowns over the three years standing at just about -20%. Within the theme, graphics processor major Nvidia has fared the best, with its stock rising by 66% year-to-date. On the other hand, exchange major CME Group has been the weakest performer in our theme, rising by just about 13% over the same period.
[9/27/2021] Bitcoin Falls On China’s Crypto Crackdown. Are These Crypto Stocks Better Picks?
Bitcoin prices have declined by almost 7% since Friday, to levels of around $42,000 a unit although it recovered a bit over the weekend. The cryptocurrency also remains down by about 11% over the past month. The recent volatility comes as China’s central bank announced that all cryptocurrency transactions in the country were illegal. While a ban on crypto trading came into effect in China in 2019, it apparently continued via offshore exchanges. With the latest developments, crypto trading of all forms is likely to be shut down in China, and this likely caused liquidation of cryptos, putting pressure on prices.
While China’s crypto crackdown is a setback, it probably doesn’t change the course for the broader adoption of cryptocurrencies, which have the potential to be one of the most disruptive technologies of our time. Investors who want to play the long-term upside in cryptocurrency adoption, without exposing themselves to this sort of volatility in crypto pricing, should take a look at our indicative theme on Cryptocurrency Stocks which includes semiconductors, payments, and brokerage companies that have exposure to the cryptocurrency value chain. The theme has gained roughly 27% year-to-date, compared to the S&P 500 which is up by about 19% over the same period. Within our theme, graphics processor major Nvidia has fared the best, with its stock rising by 69% year-to-date. On the other hand, exchange major CME Group has been the worst performer in our theme, rising by just about 9% over the same period.
[8/23/2021] With Bitcoin Back At $50K, Consider These Crypto Stocks
Bitcoin prices have been on a wild ride this year. While prices for the bellwether cryptocurrency more than doubled to levels of around $65,000 between early January and mid-April 2021, driven by higher institutional interest, prices fell back to levels of just under $30,000 as of mid-July, due to China’s crackdown on Bitcoin trading and the U.S. Federal Reserve’s increasingly hawkish stance. However, the currency has recovered swiftly from the recent lows, rising by about 65% since July 20th, and trades at about $50,000 currently. The recent recovery is apparently driven by factors including short-covering, as well as signs that the U.S. SEC was increasingly open to allowing Bitcoin exchange-traded funds.
Investors who want to play the long-term gains in cryptos, without exposing themselves to the volatility and boom and bust cycles in cryptocurrency pricing, should take a look at our indicative theme on Cryptocurrency Stocks which includes semiconductors, payments, and brokerage companies that have exposure to the cryptocurrency value chain. The theme has gained roughly 24% year-to-date, compared to the S&P 500 which is up by about 19% over the same period. Within our theme, graphics processor major Nvidia has fared the best, with its stock rising by 59% year-to-date, driven by strong demand for its chips as well as its recent stock split. On the other side, exchange major CME Group has been the worst performer in our theme, rising by just about 9% over the same period.
[7/1/2021] Bitcoin Prices Crash
Bitcoin prices have crashed from levels of around $62,000 in mid-April to just about $34,000 as of Wednesday. The crypto bear market appears to be driven by a host of factors, including China’s crackdown on Bitcoin trading and mining and Tesla’s unexpected reversal of its decision on accepting the digital currency as payment for its cars. Moreover, the U.S. Federal Reserve has turned increasingly hawkish following its mid-June meeting indicating that it could start hiking interest rates from 2023, rather than 2024. This is also likely putting pressure on non-productive assets such as cryptocurrency.
Now, although the market sentiment for cryptos, in general, is clearly bearish, cryptocurrencies have the potential to be one of the most disruptive technologies of our time. Moreover, with increasing institutional interest, they appear to be here to stay as an asset class. Investors who want to play the long-term gains in cryptos, without exposing themselves to the volatility and boom and bust cycles in cryptocurrency pricing, should take a look at our indicative theme on Cryptocurrency Stocks which includes semiconductors, payments, and brokerage companies that have exposure to the cryptocurrency value chain. The theme has gained roughly 22% year-to-date, compared to the Nasdaq-100, which has returned about 15% over the same period. Within our theme, graphics processor major Nvidia has fared the best, with its stock rising by 53% year-to-date, driven by strong demand for its chips as well as its planned stock split. On the other side, processor major Advanced Micro Devices has been the worst performer, with its stock up by just about 2% this year.
[4/5/2021] Crypto Stocks To Watch
Cryptocurrency prices have surged this year. Crypto bellwether Bitcoin has almost doubled year-to-date to levels of about $60k as of the end of last week, as more institutional investors warm up to the currency, with companies such as Tesla also indicating that they will accept bitcoin payments from customers. However, investing in Bitcoin and other cryptos is risky at current levels. With Covid-19 cases on the decline and vaccination rates in the U.S. rising, the economic outlook is improving. Bond yields are also trending higher, with the yield on the 10-year Treasury note rising from around 1% earlier this year to close to 1.70% currently. Considering this, investors are moving funds back to real-economy sectors, and it’s likely that non-productive assets such as Bitcoin will eventually be impacted. Our indicative theme on Cryptocurrency Stocks could be a safer way to play the long-term upside from cryptocurrencies, without taking a position in individual currencies. The theme, which includes semiconductor, payments, and brokerage companies that have exposure to the cryptocurrency value chain, is up by about 122% since 12/31/2019, compared to the S&P 500 which is up by about 24%. Here is a look at the recent developments for some of the stocks in our theme.
PayPal, a large online payments processor, allows customers to buy, hold, and sell cryptocurrencies. The company has taken this a step further, launching its “Checkout with Crypto” service last week, enabling U.S. customers to use their crypto holdings to pay at millions of online merchants worldwide.
Nvidia indicated a few weeks ago, that it would be launching a GPU that was dedicated to mining cryptocurrencies. Nvidia has seen gaming GPU shortages in the past, as its gaming processors were being used to mine cryptocurrency. The move should let the company better target the crypto mining space, while potentially alleviating GPU shortages for gaming.
CME Group, a derivatives exchange, plans to launch new Micro Bitcoin futures from early May, subject to regulatory approval. The smaller-sized futures contracts are a tenth of the size of one Bitcoin and will be targeted at institutions and sophisticated traders.
[3/16/2021] Crypto Stocks To Watch As Bitcoin Nears $55k
Cryptocurrency prices have surged this year, with Bitcoin now up by around 90% since early January, trading at levels of around $55k currently. However, Bitcoin looks quite risky at current levels due to a couple of factors. With Covid-19 cases on the decline, the economic outlook is improving and bond yields are also on the rise. Considering this, investors are likely to start moving funds back to real-economy sectors, and non-productive assets such as Bitcoin, which rallied big through the pandemic, could be impacted. Our indicative theme on Cryptocurrency Stocks could be a safer way to play the long-term upside from cryptocurrencies, without taking a position in individual currencies. The theme, which includes semiconductor, payments, and brokerage companies that have exposure to the cryptocurrency value chain, is up by about 124% since 12/31/2019, compared to the S&P 500 which is up by about 22%. Year-to-date, the theme is up by 4%, compared to the S&P 500 which is up around 5%. Within our theme, digital payments player Square has been the strongest performer, rising by 287% since the end of 2019, while exchange major CME Group has been the worst performer in our theme, rising by just about 4% over the same period.
[2/18/2021] Which Stocks Should You Buy As Bitcoin Hits $50k?
Cryptocurrency have continued their surge this year, driven by retail and institutional interest. While the crypto market bellwether Bitcoin has soared 5x over the last 12 months and by almost 80% year-to-date, lesser-known crypto Dogecoin is up by over 10x year-to-date. To be sure, these currencies remain a risky investment, given their relative lack of utility and extremely high volatility. Our indicative theme on Cryptocurrency Stocks – which includes semiconductors, payments, and brokerage companies that have exposure to the cryptocurrency value chain – could be a safer way to play the crypto space, without taking a position in individual currencies. The theme has returned about 151% since the end of 2019, compared to about 22% for the S&P 500. The theme is also up 14% year-to-date, versus about 5% for the S&P 500. Payments player Square remains the strongest performer in our theme, rising by over 330% since the end of 2019, driven by its Bitcoin exposure, and also by an increasing preference for digital payments among consumers and businesses. On the other side, financial exchange major CME Group has been the worst performer in our theme, down by about -5% over the same period.
[Updated 1/20/2021] Cryptocurrency Stocks
Bitcoin prices have surged by more than 50% over the last month and remain up by about 4x over the 12 months, due to higher retail and institutional interest. That being said, Bitcoin remains a risky investment, given its relative lack of utility and extremely high volatility. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency value chain – could be a safer way to play the crypto space, without betting on individual currencies. The theme has done well, rallying by over 100% over the last year. Below is a bit more about the key companies in the theme and how they have been faring.
Nvidia stock saw big gains over 2020, driven by growing demand for its GPUs from gaming consoles and data centers and its planned acquisition of CPU designer ARM. The company recently indicated that it could restart the production of dedicated crypto mining GPUs, which essentially remove the video outputs that are required for gaming.
Square a payments company, allows users to buy and sell bitcoin via its Cash mobile payment application. The company said that bitcoin-related Revenue surged by about 8x over the first nine months of 2020 to around $2.8 billion.
PayPal a large online payments processor has also reported increasing engagement on its PayPay mobile app after it introduced support for bitcoin last October, with about half its crypto users opening the PayPal app daily.
CME Group the world’s largest financial derivatives exchange, also offers bitcoin futures contracts. The exchange has emerged as the world’s largest futures exchange for Bitcoin, with open interest – contracts traded but not squared off – for the cryptocurrency standing at $2.1 billion.
[Updated 12/7/2020] How Nvidia, Square & PayPal Stocks Are Benefiting From Soaring Bitcoin Prices
Bitcoin prices have surged by over 160% year-to-date, driven by multiple factors including higher institutional interest, fintech companies Paypal and Square’s moves into the crypto space, and also by a view that scarce digital currency could be a hedge against inflation and a weakening U.S. dollar. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up a solid 110% year-to-date, compared to the S&P 500 which is up by just about 14% over the same period. Key stocks in our theme include Square, PayPal Holdings, Nvidia, and CME Group.
Although crypto likely represents a small portion of these company’s revenues at the moment, it does have the potential to be big. For example, Payment apps Square and PayPal, who make money by buying bitcoin from brokers and selling them to their customers by adding a “spread” stand to benefit as prices and volumes rise. Square’s Cash App generated about $1.63 billion in Bitcoin-related sales in Q3 2020, an 11x jump year-over-year. Similarly, Nvidia also benefits from demand for its top-of-the-line GPUs such as the Ampere lineup from cryptocurrency miners.
[Updated 10/29/2020] Cryptocurrency Stocks To Watch
Interest in cryptocurrency is surging once again with Bitcoin prices up by almost 30% over the last month, driven by growing institutional interest and Paypal’s recent move to allow its customers to buy and sell certain cryptocurrencies. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up 88% year-to-date, compared to the S&P 500 which is up by just about 5% over the same period. This theme could be of interest to investors who are looking for upside from cryptocurrency adoption and prices, but want to avoid buying into the currencies themselves considering the volatility, risk of fraud, or cyber theft, or potential portfolio mandates. Below is a bit more about the stocks in our theme and how they have fared this year.
Square cash mobile wallet app has emerged as a very popular way for people to buy and sell Bitcoin. The stock has gained a whopping 183% year-to-date, as investors bet that Square’s digital payment solutions will continue to gain traction through and post Covid-19. The stock has dropped by about -9% over the last 5 trading days, however.
Nvidia a semiconductor company that is best known for its graphic processing units which are increasingly used in machine learning and AI, is also finding applications in bitcoin mining. The stock has gained over 131% year to date although it declined by about -3% over the last week.
PayPal a large online payments processor, has indicated that it would allow customers to buy, hold, and sell cryptocurrencies such as Bitcoin and Ethereum directly within its PayPal and Venmo app. The stock is up by 88% this year and was down by about -1% over the last 5 trading days.
Advanced Micro Devices is a semiconductor major that makes CPUs and GPUs, which are increasingly used in bitcoin mining. The stock has gained about 79% year-to-date and remained largely flat over the last 5 trading days.
CME Group the world’s largest financial derivatives exchange, also offers bitcoin futures contracts. The stock is down by about -18% year-to-date and declined by about -2% over the last week.
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