These 4 companies will benefit the most from a crypto rebound

Investing in cryptocurrencies isn’t the only way to profit from a boom in the crypto market. Some companies, for example, now Bitcoin (BTC -1.04%) directly on their balance sheet and are indirect bets on the future direction of digital currency. Other companies have targeted a specific niche in the industry as a source of income and cash flow.

Here are four companies in different niches that have one thing in common: Their business models make them the most likely to benefit from a crypto market rally this year.

1. Coin base

Perhaps the one company that will benefit the most from a crypto rebound is Coinbase Global (COIN -0.25%). Ever since last year’s market downturn, the trading platform has been losing retail investors at a steep pace. At the same time, crypto trading has been declining, and the company has been looking for ways to increase transaction revenue.

As a result, it’s easy to see why many investors — with the notable exception of Cathie Wood of Ark Invest — have soured on Coinbase’s prospects. When the company reported quarterly results in February, the company beat Wall Street revenue and earnings expectations, but many core metrics (such as transaction volume) were down.

Image source: Getty Images.

While Coinbase has had some success in acquiring institutional clients and coming up with some new revenue streams, the company remains heavily leveraged to the individual retail investor.

Once a crypto rebound starts, more people will want to trade again, and that can help restore the company’s active monthly user count and volume numbers.

2. Bitcoin miners

As a general rule, Bitcoin mining companies do best when the price of the token increases. So miners had a tough time in 2022, when the digital currency collapsed by 64%.

Even when it stabilized at the end of the year, it did little to help miners because the crypto was trading in such a relatively narrow range.

As a result, the crypto winter of 2022 ended with an increasing number of Bitcoin miners reporting disappointing numbers for the year. In fact, things got so bad that some shut down a number of their mining rigs and halted operations. Riot Blockchain even changed its name to Riot Platforms (RIOT -1.76%).

It was simply not profitable to mine crypto with Bitcoin struggling below $20,000 and energy prices rising. That’s why I think Bitcoin mining companies like e.g Marathon Digital Holdings (MARA -8.31%) could be ready for major reversals in 2023. It is just a matter of waiting for the price to break through the $25,000 level, which has been a break-even level for many miners.

3. Micro strategy

On the surface, Micro strategy (MSTR -1.66%) is just another enterprise software company. But dig a little deeper and you’ll realize that the outlook is heavily leveraged on the price of Bitcoin, and that the company’s executive chairman, Michael Saylor, is one of the biggest Bitcoin bulls in the world.

A significant portion of the company’s balance sheet now consists of Bitcoin. Therefore, in a growing crypto market environment, the valuation of MicroStrategy is going to rise.

At the end of 2022, the company announced a series of new Bitcoin purchases. It now has 132,500 bitcoins, worth about $3 billion at today’s prices. This is approximately equal to the entire market value of the company.

In 2022, the company also announced new customer offerings centered around the Bitcoin Lightning Network, which enables peer-to-peer payments. As the token’s price starts to increase, more people will use the Bitcoin Lightning Network, and that may spur more companies to embrace software solutions from MicroStrategy.

Which companies should be bought and held?

All of these companies – Coinbase, Marathon Digital Holdings, Riot Platforms and MicroStrategy – are directly linked to digital currency, and are thus best positioned to ride any new upswing in the crypto market. They have long-term business models based on crypto and blockchain technology, offering exposure to any rally.

If you are careful about picking specific winners and losers, you can always choose a diversified exchange-traded fund (ETF) linked to crypto. You may not be able to capture the entire upswing in the market, but investing in an ETF is a less risky and more diversified way to invest in the long-term future of cryptocurrency.