Venturesome Canadian investors have a lot of options out there after the recent Bitcoin bust and tech wreck (Shopify (TSX:SHOP)(NYSE:SHOP) stock plunged 31% from peak to trough) induced by inflation jitters.
Inflation is going to be transitory, at least according to the Fed. But the market has trust issues with central banks right now, and that’s despite the recent calming in the 10-year U.S. Treasury note yield, which dropped another three basis points back to the 1.5% range. Just like that and tech stocks are leading the upward charge again, reversing the rotations that have been ongoing in the heat of the moment.
Bitcoin could go bust again
Bitcoin has been on unstable footing after nearly a year of calming down in an attempt to diminish its reputation for being a ridiculously volatile asset. The slide to US$30,000 was quite alarming, and it seemed like the crypto trade had gone up in a poof of smoke, as it did back in late 2017. Just when investors were ready to throw in the towel on Bitcoin, it bounced back to flirt with the US$40,000 levels. It’s this latest bounce-back that has me most concerned about where the cryptocurrency could be headed next, however.
If Bitcoin can sustain a near-term rally above US$40,000, perhaps towards US$50,000, an ominous head-and-shoulders top pattern could be in the works. And if it comes to fruition, many Bitcoin investors could see their 2020 gains get wiped out without a moment’s notice.
While I may not be a technical analyst, Bitcoin’s chart does scare me. That’s why I’d much rather be in a top-tier growth stock like Shopify at this juncture.
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Headwinds may get the better of Bitcoin
Bitcoin faces a tough road ahead. China has been cracking down on cryptocurrency miners, and the U.S. could be next, with U.S. Treasury Secretary and former Fed chair Janet Yellen expressing her distaste for cryptocurrencies like Bitcoin and their decentralized nature. Most recently, Yellen called for stricter cryptocurrency compliance with the IRS (Internal Revenue Service). She wants cryptocurrency transfers over US$10,000 (between a quarter and a third of the price of a single Bitcoin) to be reported to the IRS.
There’s no question that Bitcoin has aided illicit transactions. Even if Bitcoin does bounce back to its high, Yellen will probably feel the need to put forth more regulatory hurdles or perhaps even cause a crackdown that could pull the plug on the Bitcoin trade as we know it.
Shopify stock: A better long-term bet
From a technical and fundamental perspective, the stakes couldn’t be higher, with the light now shined on the energy-intensive process of cryptocurrency mining. Shopify, which could embrace blockchain technologies or accept future cryptocurrencies that are better than Bitcoin, remains my top buy for investors seeking Bitcoin-like gains over the next three years.
Shopify has a lot going for it over the long haul, even though the short- to medium-term picture seems bleak, with diminishing pandemic tailwinds and worries of higher rates. The company will continue to innovate and count me as unsurprised if the name can continue pulling higher in spite of the weakening e-commerce industry backdrop. That’s just the kind of company you’re getting from Shopify. A firm with a visionary leader who’s able to defy the odds.
Bitcoin vs. Shopify stock: Better buy?
So, between Bitcoin and Shopify stock, Shopify wins by a landslide. I have no idea if we’ll be talking about Bitcoin in 10 years from now. As for Shopify, I’d bet it’d be a heck of a lot larger and more dominant than it is today.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify and recommends the following options: short January 2023 $1160 calls on Shopify and long January 2023 $1140 calls on Shopify.