Bitcoin
These 2 Stocks Offer Safer Ways to Invest in Crypto
Crypto markets have been hot this year, with Bitcoin (CRYPTO:BTC) reaching new highs in March. One way for new investors to gain exposure to cryptocurrency is through exchange-traded funds (ETFs), as earlier this year, regulators approved many spot Bitcoin ETFs.
These ETFs track Bitcoin and give investors direct exposure to its price movements. This means they will not necessarily provide safer, less volatile options for investing in Bitcoin. You will still be vulnerable to wild swings in the crypto market.
Instead, you might consider investing in stocks that have strong underlying businesses and exposure to Bitcoin. Two such examples are Block (NYSE: SQ) and PayPal (NASDAQ: PYPL). See why these might be better options for you than spot Bitcoin ETFs.
1. Block
Block, the company formerly known as Square, helps merchants easily process payments using its app and point-of-sale devices. Bitcoin has also been a key part of its business.
Last year, it was the company’s biggest source of revenue; Bitcoin-related transactions generated an impressive $9.5 billion in sales, representing 43% of the company’s revenue ($21.9 billion). Block’s second-largest source of revenue came from its subscriptions and services, which generated $5.9 billion in sales. Although Block does not generate strong margins on Bitcoin transactions, the company still posted an overall profit last year, with net profit totaling $9.8 million.
The company’s Cash App makes it easier for people to buy and sell Bitcoin. And Block is delving even deeper into crypto as it plans to build its own Bitcoin mining system. It also recently completed the development of its own Bitcoin mining chip.
For crypto investors, Block may be a safer long-term play than investing in spot Bitcoin ETFs. With a diversified and profitable business, it is easy to monitor the company’s performance and growth; it is a less speculative investment than crypto can be. While investors still face risks with the stock, given the importance Bitcoin plays in Block’s operations, it could be a better overall investment option.
Stocks currently trade at a price-to-earnings growth rate (PEG) of less than 0.9, suggesting this could be a cheap option for growth investors to hold in the long term.
2. PayPal
PayPal also allows users to buy and sell crypto, but its operations are smaller and it does not have an entire segment dedicated to Bitcoin-related revenue like Block does. In this sense, PayPal can be an even safer option for investors. However, it is still clearly bullish on crypto as it has launched its own stablecoin, PayPal USD, which it claims is designed for payments.
The story continues
Unlike Block, investors expect consistent profits from PayPal. The big problem for the business was simply that its growth rate was dismal. But it is a pretty safe option for crypto enthusiasts.
The payments processing company reported earnings on Tuesday, and its revenue for the first three months of the year totaled $7.7 billion, increasing 9% year over year. Net profit of US$888 million also increased 12% compared to the same period last year.
PayPal is another decently valued stock, as it trades at just 13 times its expected future earnings (based on analyst expectations) and its PEG ratio is around 0.6. If you want some relatively safe exposure to crypto or just want to own cheap growth stocks, PayPal could be an excellent option to add to your portfolio today.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin, Block and PayPal. The Motley Fool recommends the following options: June 2024 short calls for $67.50 on PayPal. The Motley Fool has a disclosure policy.
Forget Spot Bitcoin ETFs: These Two Stocks Offer Safer Ways to Invest in Crypto was originally published by The Motley Fool