When most people think about becoming a crypto millionaire, they usually think of buying a single crypto like Bitcoin (CRYPTO:BTC) then keep it because it offers stratospheric returns. Over a long enough period of time, even a relatively small initial investment could turn into $1 million or more. And, indeed, according to the Crypto Wealth Report from Henley & Partners, there are currently over 40,000 Bitcoin millionaires in the world.
But here’s another strategy you may not have thought of: buying crypto stocks that have the potential to outperform. Bitcoin. This year, for example, Bitcoin is up more than 160%, but a number of crypto stocks are up 300% or more for the year. Here’s a closer look at two crypto stocks that could help put you on the path to millionaire status.
Global Coinbase
Cryptocurrency exchange Global Coinbase (NASDAQ:COIN), up 330% in 2023, could be one of the biggest beneficiaries of any extended Bitcoin rally in 2024. When Bitcoin is down, investor interest wanes. But when Bitcoin is on the rise, investors suddenly decide to dip their toes in the crypto waters. Bitcoin could therefore be the key to attracting new users and increasing overall trading volume.
Bitcoin now accounts for around a third of the total trading volume on the Coinbase platform. So while Coinbase offers 240 possible cryptos to trade, the real focus is on Bitcoin. And right now, Coinbase appears to be looking for ways to tap into growing investor enthusiasm around Bitcoin. During a recent marketing promotion, all you had to do was make a single crypto transaction on the platform, and you would be entered into a drawing for two Bitcoins (worth over 86 000 at current prices).
In addition to courting retail investors, Coinbase is looking for ways to become more attractive to large institutional investors. In August 2022, for example, it partnered with black rock, the world’s largest asset manager, to provide cryptocurrency trading services to institutional investors. Then, last June, BlackRock tapped Coinbase to be the custodian for its highly anticipated Bitcoin spot exchange-traded fund (ETF) offering.
And there are other long-term initiatives at Coinbase, including one that involves the tokenization of real-world assets. The big idea here is to allow Wall Street firms to trade traditional financial assets on the blockchain. In August, Coinbase launched Base, its own proprietary blockchain, to help make this a reality.
The big caveat, of course, is that Coinbase has generated such outsized returns this year that some institutional investors are starting to take profits on their positions. Ark Invest, for example, recently sold $100 million worth of Coinbase shares in a single week. This is most likely a routine portfolio rebalancing at the end of the year, but what if Cathie Wood of Ark Invest think the rally was exaggerated?
MicroStrategy
Another crypto stock strongly linked to the price of Bitcoin is MicroStrategy (NASDAQ:MSTR). At first glance, MicroStrategy might look a lot like an enterprise software stock. But MicroStrategy is really just a giant Bitcoin hoard. Some have even compared the company to a Bitcoin ETFs.
Currently, MicroStrategy holds 174,530 Bitcoins on its balance sheet, making the company the largest public holder of Bitcoin in the world. To put this number in context, the current circulating supply of Bitcoin is approximately 20 million coins. Thus, MicroStrategy controls just under 1% of the total Bitcoin supply available worldwide.
As one might imagine, this means that the price of MicroStrategy is strongly linked to the price of Bitcoin. If Bitcoin rises, then the price of MicroStrategy rises. Year to date, Bitcoin is up over 160% this year and MicroStrategy is up 310%. As long as the price of Bitcoin continues to increase, MicroStrategy’s value should also continue to increase.
Just keep in mind, though, that most of MicroStrategy’s market value is tied to Bitcoin. MicroStrategy’s total market capitalization is currently $9.1 billion, while the total value of Bitcoin on its balance sheet is $7.5 billion. Thus, the market places only a low valuation on MicroStrategy’s underlying software business. As the company now ventures into AI-based software solutions, MicroStrategy’s core enterprise software business grows just 1%.
How much Bitcoin is too much Bitcoin?
In 2024, investors will have multiple ways to purchase Bitcoin. They can buy Bitcoin directly from the crypto market. They will be able to buy Bitcoin through new spot Bitcoin ETFs that are expected to arrive in the first quarter of the year. And, finally, they can buy Bitcoin through “Bitcoin proxy stocks” like Coinbase and MicroStrategy.
So, as an investor, the question becomes: how much Bitcoin is too much Bitcoin? If you already have a large position in Bitcoin, you may want to diversify elsewhere beyond just businesses tied to the price of Bitcoin. But if you’re looking to amplify your Bitcoin returns and accelerate your path to millionaire status, it may be worth considering these stocks as a way to boost your portfolio returns.
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Dominique Basulto has positions in Bitcoin. The Motley Fool holds positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
Crypto is on the rise and could help you become a millionaire: 2 unstoppable crypto stocks to buy in 2024 was originally published by The Motley Fool
