One Top Play Amid the Crypto Carnage

Cryptocurrencies took a major dive on Monday, as the largely unregulated space allows traders to use more leverage than in other financial markets. And companies catering to the space likewise underperformed the stock market’s large drop.

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  • However, changes based on the price of cryptocurrencies may be misleading. That’s because rising adoption and investment in the space is creating a value for a number of companies catering to the industry.

    Case in point is Coinbase (COIN). The crypto brokerage benefits from the large volume of trading overall right now, even with lower prices. The company is also a big player for those institutional firms looking to onboard into Bitcoin and other cryptocurrencies.

    Shares are now down about two-thirds from their IPO nearly a year ago. That’s in spite of revenue and earnings growth in excess of 325 percent each, and a profit margin of 46 percent.

    Action to take: Investors may like shares for the long haul, as they now trade at about 5 times earnings. While there’s a large number of brokers in the industry, Coinbase is one of the larger players for institutional wealth, so it will likely stay at the top of the space for some time to come. As an early-stage company, the stock doesn’t yet pay a dividend.

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  • For traders, the January 2023 $150 calls, last going for about $8.80, offer a leveraged upside to a rally in shares. The premium in the calls reflects the likelihood that the stock will rebound from its massive recent drop at least partially in the coming months.

     

    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.