At the end of January 11, bitcoin was down 7% over the past week, and when the largest digital currency falters, other assets often follow suit.
These include other cryptocurrencies as well as stocks that are considered to be cryptocorrelated. The upside to this downside is that there might be some value among crypto stocks, a group known much more for growth than value. One way to embrace the new value available among crypto stocks while avoiding stock selection is by VanEck Digital Transformation ETF (DAPP).
DAPP tracks the MVIS Global Digital Assets Equity Index, which is a mix of companies with exposure to emerging digital economies. Among DAPP’s 25 holdings are several bitcoin miners, a group that has been punished by recent declines in the cryptocurrency.
“Bitcoin miners, who process transactions on the network and receive Bitcoin as payment, have also been hammered, falling more than 40% since last November,” Daren Fonda reports for Barron’s. “But the major miners have raised capital and increased capacity to further capture the ‘hash rate’ or overall computing power of the network. Miners with greater hashing capacity could, in theory, capture more Bitcoins distributed as payments for validating block transactions on the network.
Some of DAPP’s bitcoin miner holdings include Marathon Digital Holdings (MARA) and Riot Blockchain (RIOT). These are respectively the fifth and sixth positions in importance of the ETF, representing 11% of its weight. In an interview with Barron’s, DA Davidson analyst Christopher Brendler speaks optimistically about these names.
“These companies are seeing their growth paid for and funded in 2022, and they have a lot of Bitcoin on their balance sheets, so these are very cheap stocks in terms of earnings and enterprise value compared to Ebitda,” said Brendler.
Coinbase Global (NASDAQ: COIN) is another crypto-correlated stock that analysts are fond of. The operator of the largest digital asset exchange is the largest component of DAPP with a weight of almost 9%. Some analysts are encouraged by Coinbase’s efforts to diversify its revenue streams and reduce reliance on crypto transaction volumes and transaction fees.
“Use cases for crypto markets will continue to grow and new projects and tokens with more and different use cases will surface,” JPMorgan analyst Kenneth Worthington said in a report cited by Barron’s . “With these projects attached to tokens and Coinbase a leading exchange for buying and selling tokens, we see Coinbase as the primary direct beneficiary of the growth of the crypto market.”
For more news, information, and strategy, visit Crypto Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon and may not come to fruition. The information on this site should not be used or interpreted as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.