Bitcoin has been on a roar this year. The price, which recently crossed its three-year high, is up by more than 145% amid a global pandemic. In contrast, traditional assets, like the S&P 500, high-flying Nasdaq 100, and gold, have all gained by less than 50%. Importantly, since December 2014, Bitcoin has risen by more than 5,200%, becoming one of the best-performing assets in the world.
Bitcoin vs. S&P 500, Nasdaq 100, and gold
At the same time, with the currency becoming a digital alternative to gold, some market participants believe that the price will keep flying. For example, in a recent note, an analyst at Citibank predicted that Bitcoin’s price would soar to more than $300,000 in the coming year.
There are many ways of investing in Bitcoin, including buying the real coins and investing in Bitcoin funds like Grayscale Bitcoin Trust. Another approach is to invest in publicly traded companies with BTC exposure. Here are the best Bitcoin-related companies to invest in.
Market cap: $83 billion
TTM revenue: $7.6 billion
Square is a relatively young company. Started in 2009 by Jack Dorsey, the company has transformed itself from a small payment processor to one of the biggest companies in the United States. Its revenue has soared from $203 million in 2012 to more than $7.6 billion. In the most recent quarter, its revenue had an annualized growth of 76%, which is substantial, considering that PayPal grew by just 19%.
As a result, the company is now valued at more than $83 billion, making it bigger than Goldman Sachs, which is valued at more than $76 billion.
Square’s growth is partly because of how diversified its business is. For example, it owns Cash-App, one of the most common payment apps in the US. It also processes payments for many American companies. Most importantly, it uses this data to provide loans through its Square Capital business.
Square has exposure to Bitcoin in two ways:
Cash App is one of the biggest platforms that people use to send Bitcoins in the US. In the most recent quarter, the company generated more than $1 billion in revenue from BTC.
The company has recently converted $50 million of its cash to Bitcoin. It did that when BTC was trading at ~ $12,000, which means that these funds have already grown by $25 million.
Market cap: $1.97 billion
Industry: Business analytics
TTM revenue: $482 million
MicroStrategy is a mid-cap business analytics company started in 1989. The company provides solutions, including hyper-intelligence and business intelligence, to some of the world’s biggest companies. Its solutions are integrated into most business software, including Microsoft Office, Workday, and Salesforce. Some of its customers are 3M, Adidas, Aegon, and Adobe, among others.
MicroStrategy generates about $490 million in revenue every year and makes a net income of more than $34 million.
To be fair, very few people knew about MicroStrategy, a small company operating in an obscure business solutions industry, until the third quarter of this year. In their statement, they alleged to have decided to convert more than $250 million of their cash holdings into Bitcoin. At the time, Bitcoin was trading at about $11,000, which means that its coins have grown into more than $362 million. This is equivalent to more than 18% of its total market cap.
Market cap: $222 billion
TTM revenue: $20.2 billion
PayPal is a company most of us know. For starters, the firm provides payment solutions worldwide. Its eponymous service allows people to send money to one another and businesses. Its Venmo app is one of the biggest peer-to-peer payment solutions, while its Braintree helps businesses receive payments.
For years, PayPal has taken a backseat in the cryptocurrency industry. Unlike Square, users of Venmo could not send Bitcoins to one another.
This changed recently when the company decided to move deeper into the Bitcoin ecosystem. It did this by first enabling people to make BTC transactions in its network. According to media reports, the company also intends to use its healthy balance sheet to buy companies already in the industry. BitGo, a company that offers custody services, will be a key target.
Therefore, as one of the biggest payment companies in the United States, and with its millions of users, the firm will be a major player in Bitcoin. In addition to this, PayPal has created a big moat in payments that makes it an overall good company to invest in. For one, its revenue has grown from more than $5 billion in 2012 to more than $20 billion in the past 12 months.
Market cap: $2.45 billion
TTM revenue: $2.1 billion
Overstock is an e-commerce company started in 1999 at the height of the dot com boom. Today, the company sells thousands of items through its website and mobile applications. Most of its sales are in the home furnishings and décor industry, which makes it a close competitor of Wayfair.
Wayfair is a relatively small player in e-commerce. Indeed, its total annual revenue has been wavering over the years. For example, the sales rose to more than $1.8 billion in 2018 and then crashed to more than $1.45 billion in 2019. It has also made losses in the past three consecutive years.
However, Overstock was among the first company to realize the importance of Bitcoin. Indeed, its former CEO is famous for selling his shares to invest in Bitcoin. In its most recent annual filing, the company said that it had about $2.6 million in Bitcoins. While that is a small amount, it also means that the value has more than doubled. Most importantly, OSTK is one of the biggest firms that accept Bitcoins.
As shown below, the Overstock share price has outperformed BTC this year because of the demand for e-commerce and its close association with Bitcoin.
Bitcoin and Overstock YTD performance
Grayscale Bitcoin Trust (GBTC)
Assets: $5.25 billion
TTM revenue: N/A
Unlike the other four exposure options mentioned before, GBTC is not a company. Instead, it is a fund initiated by the Digital Currency Group, which is one of the biggest players in digital currencies. The fund invests in Bitcoin, making it the biggest such fund in the world. Indeed, as shown below, its price usually tracks the movement of Bitcoin. But over the years, the trust tends to perform better than the currency, albeit at a smaller margin.
Bitcoin vs. GBTC
So, why would you invest in GBTC instead of Bitcoin? First, GBTC is an SEC-regulated fund, which makes it relatively safe. Second, its price is $19 – which is cheaper than the overall BTC price, which makes it more profitable. Finally, unlike Bitcoin, it cannot be hacked since it trades just like stocks.
Investing in Bitcoin has proven to be a good thing since the currency tends to outperform other assets over the years. Investing in the four companies, and one trust mentioned here can give you some exposure to the currency.