With its inflationary hedge benefits and growth in crypto trends such as NFTs, I believe a Bitcoin rally in 2022 is a strong possibility and to profit from it here are my best shares to buy now.
2021 has been a volatile yet successful year for cryptocurrencies with Bitcoin and Ethereum reaching new peaks of over $67,000 and almost $5,000 respectively in November.
Despite cryptocurrencies subsequently suffering from one of the largest market selloffs, I believe prices of these coins could recover and rise further in 2022. Ahead of this there are two stocks, Coinbase (NASDAQ:COIN) and Block (NYSE:SQ), which I will be investing in to get indirect exposure to crypto assets. Here, I assess which is a better investment.
Coinbase
As the largest cryptocurrency exchange, Coinbase has over 73 million users and offers exposure to over 120 different coins. This has made it one of the most attractive marketplaces for those wishing to broaden their crypto holding beyond mainstream Bitcoin and Ethereum, something current competitors are unable to match.
Despite shaky third-quarter earnings back in October, where the company missed its earnings and revenue estimates, I still see a lot of value to be gained from Coinbase as it benefits from first-player advantage and increasing numbers of newcomers to the crypto space thanks to trends such as NFTs.
With crypto being more widely used and accepted as a payment format, Coinbase shares could continue to rise as they expand into offering other services such as crypto wallets and different, new, tokens.
However, as Coinbase currently generates nearly all its revenue from the buying and selling of crypto currency, the stock’s performance relies heavily on large coins like Bitcoin performing consistently strongly, which makes the stock somewhat volatile.
Block
Another way to play the crypto rally is through digital payments platform Block, formerly known as Square. The company, founded by former Twitter CEO Jack Dorsey, is one of the largest accepting Bitcoin payments.
In 2021 just over half of its revenues were generated from Bitcoin trading whilst 40% came from digital and seller fees. I think this diversification makes it a strong stock to own as it is less volatile and provides exposure to other growing trends, namely digital payments.
Block’s recent name change could also be a move to join the metaverse trend as it copies peers such as Facebook, which changed its name a few months ago to Meta. With the metaverse and Web 3 incorporating crypto and blockchain technology, I see possibility for Block to increase its Bitcoin holdings further from its current $200 million.
The verdict
I think both Coinbase and Block provide strong exposure to cryptocurrencies and, with a recent crypto selloff, I think both stocks are relatively cheap now so provide a good entry point.
However, whilst Coinbase provides greater exposure to crypto markets and has key advantages such as first-mover status, the stock is too volatile for me.
Instead, I see Block as the better buy out of the two. Its diversified portfolio and operation across the fintech ecosystem beyond just crypto as well as the move to the metaverse could open up key new pathways for the company in coming years.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has recommended Block, Inc. and Twitter. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
