The cryptocurrency market has been going through a rough patch in recent weeks. Bitcoin (BTC), the world’s most popular cryptocurrency, has suffered particularly badly over the past two months after hitting an all-time high earlier this year. Several factors are behind Bitcoin’s recent decline, including a broader market selloff in early August.
However, Bitcoin still has a lot of potential, and if we look at the long term, with the Federal Reserve nearing the end of its monetary tightening campaign, it would be ideal to take the buy-the-dip approach. Four Bitcoin-centric stocks with upside potential are Interactive Brokers Group, Inc. (IBKR – Free report), Bloc Inc. (SQ – Free report), NVIDIA Company (NVDA – Free report) and Robinhood Markets, Inc. (HOOD – (Free report).
Several Factors Are Hurting Bitcoin Stocks
Bitcoin has been on a downward slide for the past two months. The cryptocurrency is currently trading at around $58,091.90, down more than 21% from its all-time high of $73,750 reached on March 14.
Bitcoin’s price has been trading in a tight range since April, briefly breaking above $65,000 in June. Even the April halving failed to boost Bitcoin’s price. This halving, which typically reduces the reward for mining new blocks by 50% to cap Bitcoin’s total supply at 21 million, tends to drive up demand and prices. However, this time, Bitcoin’s value dropped significantly after the halving.
The cryptocurrency market suffered another blow during the widespread bloodbath in early August, sparked by fears of an economic slowdown. The price of Bitcoin subsequently fell below $55,000. However, Bitcoin has since attempted a comeback, but has remained range-bound.
Bitcoin Stocks to Benefit from Rate Cuts
Although the Federal Reserve is unlikely to make a significant rate cut after the release of moderate inflation data, investors are confident the central bank will cut interest rates by at least 25 basis points.
Currently, the CME’s FedWatch tool indicates a 100% probability of a 25 basis point interest rate cut at the Fed’s September FOMC meeting. For November, market experts are predicting a 100% probability that the total rate cut (year-to-date) will be 50 basis points and a 94.4% probability that it will be 75 basis points.
Any drop in interest rates, no matter how small, bodes well for growth assets like cryptocurrencies because it reduces the opportunity cost of holding assets that aren’t generating returns. In a low-interest-rate environment, investors are more likely to seek out assets that offer higher return potential, even if they involve higher risk.
4 Cryptocurrency-Focused Stocks With Upside Potential
We narrowed our search to four crypto-focused stocks that have strong potential for 2024. Each of our picks carries either a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Interactive Brokers Group
Interactive Brokers Group IBKR is a global automated electronic broker. IBKR executes, trades and exchanges cryptocurrencies. IBKR’s Commodity Futures Trading Desk also offers clients the ability to trade cryptocurrency futures.
Interactive Brokers Group is forecasting earnings growth of 18.4% for the current year. The Zacks Consensus Estimate for current-year earnings has moved up 1.6% over the past 60 days. IBKR is currently ranked #3 according to Zacks.
Image source: Zacks Investment Research
Block
Block is an online digital and mobile payments platform for consumers and merchants and is the parent company of Square and Cash App. Cash App users can buy, sell, send, and receive Bitcoin. Additionally, SQ’s decentralized tbd platform allows developers to build decentralized financial applications that run on programmable blockchains. SQ is also one of the largest investors in Bitcoin.
Block is forecasting 100% earnings growth for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.8% over the past 60 days. SQ is currently ranked #3 according to Zacks.
Image source: Zacks Investment Research
NVIDIA
NVIDIA NVDA is the world leader in visual computing technologies and the inventor of the graphics processing unit (GPU). Over the years, NVDA’s business has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.
NVIDIA is forecasting earnings growth of over 100% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 4.5% higher over the past 60 days. NVDA is currently ranked #3 according to Zacks.
Image source: Zacks Investment Research
Robinhood Markets
Robinhood Markets HOOD operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin, and other cryptocurrencies using its Robinhood Crypto platform.
Robinhood Markets’ expected earnings growth rate for the current year is over 100%. The Zacks Consensus Estimate for current-year earnings has improved by 38.2% over the past 60 days. Robinhood Markets is currently a Zacks Rank #2.
Image source: Zacks Investment Research
