Cryptocurrencies, especially Bitcoin, have come down a long way from their yearly peak. Many speculators and crypto investors believed that Bitcoin would reach US$100,000 before falling, but China’s crackdown on miners and Elon Musk’s concerns about the energy usage associated with Bitcoin.
These two became the catalysts, but Bitcoin was probably poised for a major cyclical fall anyway. It is currently trading at almost half its peak valuation. And it wasn’t the only cryptocurrency that experienced a sharp decline. Ethereum is still 49% down, and BinanceCoin came down to US$286 from its yearly US$690.9 peak.
Right now, we can’t be sure when and how crypto would rally and whether or not it would slide down farther, becoming more attractive for investors looking to buy low. The growing interest from institutional investors is another new variable in the equation, which is partly the reason Bitcoin fall is not sliding below $30,000, not yet at least.
But if the history repeats itself (as it most likely would), then no matter the timeline, crypto would rally, and if you are not interested in buying the cryptocurrencies themselves, there are two tech stocks you can look into for the recovery exposure.
A digital asset company
Galaxy Digital Holdings (TSX:GLXY) is a U.S.-based digital asset company with locations in six different countries. Unlike mining companies that offer their investors more direct exposure to the crypto assets, Galaxy offers a more holistic exposure. That’s because it’s also in the business of crypto trading, asset management, and investment banking, both centred around cryptocurrencies.
It has $1.3 billion worth of assets under management, and the company is banking on the market of growing institutional investor interest in crypto-related assets. Its valuation and share price trajectory don’t mimic Bitcoin’s rise and fall quite accurately, but there are pronounced similarities. For example, Galaxy is currently trading at a 45% discount to its yearly peak.
If the crypto begins to rally or some major regulatory changes come into play in favor of crypto integration, Galaxy Digital might have a chance of growing your capital at a powerful pace.
A bitcoin mining company
If you are looking for something with more direct exposure to the lead crypto Bitcoin, Hut 8 Mining (TSX:HUT) might be the way to go. It’s one of the largest publicly traded miners around the globe and currently has 94 ADA data centres. Its inventory contains about 3,522 Bitcoins that it mined itself and has a total contracted power capacity of 209 MW.
Thanks to the nature of its business, it has a relatively straightforward relationship with Bitcoin. The more Bitcoin grows, the higher the company’s asset value, and consequently, investor interest and share price might grow. It’s currently trading at a steep 59% discount and a moderately high value, so right now, it’s a powerful buy if you are expecting a crypto rally soon.
One similarity between buying the crypto asset directly and buying these companies is that if Bitcoin and other cryptos slide down further, the assets will become more attractive from a discounted valuation perspective.
So if you think the further decline is inevitable before the eventual recovery, you may consider waiting before adding them to your portfolio.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.