Current trading is near an all-time high. Bitcoin (BTC 4.48%) continues to lead the crypto market higher. As a result, analysts and investors continue to increase their price estimates of how much higher Bitcoin could rise. One of the most aggressive price predictions comes from Cathie Wood's Ark Invest, which has detailed a scenario in which Bitcoin could surpass $2 million by 2030.
If this turns out to be true, people will be upset for not getting into stocks whose success depends massively on the price of Bitcoin. The two I'm watching right now are Microstrategy (MSTR 4.11%) And Coinbase Global (COIN -0.95%).
Microstrategy
Last year, investors viewed MicroStrategy as a substitute for investing in Bitcoin. That's because MicroStrategy currently owns the largest Bitcoin holdings of any publicly traded company in the world. The company currently has 193,000 Bitcoins on its balance sheet, worth an estimated $13 billion at today's market prices. For comparison, MicroStrategy's total market capitalization is $21 billion.
And if anything, this extremely leveraged Bitcoin position is only going to grow over the next few years, as the company just announced a massive new $700 million convertible note offering. The purpose of the new offer is deceptively simple: to buy more Bitcoin. So be ready to hear more from MicroStrategy about its all-in Bitcoin strategy. Its aggressive Bitcoin strategy has already pushed the company's stock price to a 24-year high.
The only caveat here, of course, is that the company could reach a point where it simply has too much Bitcoin on its balance sheet. If the price of Bitcoin falls significantly over a longer period of time, MicroStrategy's valuation could plummet.
For this reason, I would like to see MicroStrategy continue to expand its core software business in the coming years. The company has hinted that new AI-related software offerings could be on the way. This would help provide at least some diversification and reduce the risk that the company's Bitcoin holdings are worth more than half the value of the company itself.
Coinbase Global
The price of Coinbase Global stock is also dependent on the price of Bitcoin, but not nearly to the same extent as MicroStrategy's. In my view, Coinbase is much more of a bet on the future direction of the crypto market and not just the future development of Bitcoin.
However, the core element of Coinbase's business model – investors transacting on the crypto trading platform – has been significantly strengthened by the recent price movement in Bitcoin. With Bitcoin hitting all-time highs, retail investors have been lured back into the crypto market. Bitcoin accounts for over a quarter of all trading volume on the Coinbase platform, so this is a welcome development. Presumably, an increasing bull rally would also boost trading in other cryptocurrencies.
Image source: Getty Images.
At the same time, Coinbase is an indirect beneficiary of the new spot Bitcoin ETFs. That's because Coinbase is a custodian for many of the new ETFs, including the highly successful ones launched by BlackRock and Ark Invest. This new custodial fee revenue will increase Coinbase’s subscription and services revenue. Over time, this will help balance the company's sales during difficult market periods.
This non-trading revenue is actually a fast-growing category for Coinbase and also includes stablecoin revenue and blockchain rewards revenue. For this reason, I think Coinbase is truly targeting the growth of the entire crypto and blockchain space and not just Bitcoin.
What will happen by 2030?
Keep in mind that it is impossible to predict exactly what will happen in the crypto market over the next almost seven years. There is too much uncertainty surrounding the regulatory environment and the crypto asset class has historically been extremely volatile.
But it is possible to summarize key trends and milestones that are likely to drive crypto stocks higher. If both retail and institutional investors continue to invest a larger portion of their portfolios in Bitcoin, that will be good news for crypto stocks. And if the Securities and Exchange Commission continues to approve new crypto investment products, that would also be a positive development.
As long as Bitcoin remains one of the best-performing assets, it is very likely that crypto stocks like MicroStrategy and Coinbase Global will follow suit.
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