Goldman Sachs analysts have focused on an increasing crop of publicly traded companies that are highly exposed to blockchain and cryptocurrencies and have “dramatically outperformed” the wider stock market as a result—though not without a taste of crypto’s unyielding uncertainty.
IMPORTANT INFORMATION ABOUT THE CRYPTO WAVE
According to public filings, Goldman analysts listed 19 U.S. stocks with market capitalizations over $1 billion that have the largest blockchain and cryptocurrency exposure, and found that the companies have averaged a 43 percent return this year, more than three times the S&P’s 13 percent increase.
Crypto-mining companies that run industrial-scale facilities to process crypto transactions and produce new tokens are the two biggest gainers in the group: Las Vegas-based Marathon Digital Holdings is up 218 percent year to date, and Colorado-based Riot Blockchain is up 151 percent.
Tesla, which invested $1.5 billion in bitcoin last quarter before selling around $300 million, and Facebook, which hopes to launch its own cryptocurrency and digital wallet this year, are two big players dabbling in the room.
MicroStrategy, a business analytics firm that is one of bitcoin’s largest corporate supporters, and Square, a payments fintech created by billionaire Jack Dorsey, are two more Goldman picks that have invested heavily in bitcoin, with $4.5 billion and $220 million, respectively.
BNY Mellon and JPMorgan Chase are two major banks that have spearheaded blockchain adoption through both crypto custody and interbank transactions, reducing the need for paper checks, according to Goldman. For investors interested in blockchain exposure without the bitcoin uncertainty, Goldman reports that BNY Mellon and JPMorgan Chase are two big banks that have spearheaded blockchain adoption through both crypto custody and interbank transactions, reducing the need for paper checks.
In other financial news, publicly-traded firms such as Mastercard, Visa, and PayPal have all increased their crypto acceptance this year, introducing a crypto rewards credit card, settling crypto payments, and even enabling users to purchase, sell, and exchange digital currencies.
Crypto exchange Coinbase (which went public on the Nasdaq earlier this month), exchange operator Overstock.com, blockchain leader IBM, chipmaker Nvidia, and financial services firms InvestView, Broadridge Financial, and Ideanomics round out Goldman’s blockchain picks.
“The story and theme here is far bigger than simply investing in bitcoin and forecasting its future price… It’s about the ramifications that crypto, blockchain, and bitcoin might have on the business world in the coming decade “In a note to clients last week, Wedbush Analyst Dan Ives said. “Given bitcoin’s still-nascent and volatile existence, we expect less than 5% of public corporations would invest in bitcoin in the next 12 to 18 months, but that number could rise significantly as more regulation and acceptance take to hold down the road.”
Despite rising in tandem with cryptocurrencies over the last year, several of Goldman’s picks have plummeted as crypto prices plummeted. Marathon Digital and Riot Blockchain both fell more than 70% in the weeks following bitcoin’s 60% drop in late 2017.
IMPORTANT BACKGROUND INFORMATION
During the pandemic, rising institutional acceptance and inflationary fears propelled the cryptocurrency market to new heights, but not without a lot of uncertainty. Cryptocurrencies lost $300 billion in value in less than 24 hours earlier this month, after mining fears caused more than $10 billion in bitcoin selloffs, after hitting a total market cap of nearly $2.3 trillion. Despite the crash, the global crypto market has since begun to rebound, and it is now worth nearly $2.1 trillion, up from $220 billion a year earlier. The market has nearly tripled in value this year alone.