The cryptocurrency market continues to surge higher, with technical and fundamental factors at play. Technical reasons include a robust equity market rally, fueled by expectations that the Federal Reserve has concluded its interest rate hike cycle. In October, the consumer price index rose 3.2%, below the consensus of 3.3%. And, the year-over-year (YOY) core CPI increased 4%, beating the consensus of 4.1%. This represents the lowest YOY core CPI increase since September 2021.
Cryptocurrencies, including Bitcoin (BTC-USD), rebounded in 2023 after a challenging second half of 2022. A series of events, such as the Terra Luna crash and FTX’s bankruptcy, led to a significant market decline, with Bitcoin losing more than 65% of its value.
Despite this, improved economic conditions, including reduced inflation and the Fed’s pause on interest rate hikes, sparked optimism and drove Bitcoin’s resurgence. Thus, economists anticipate this rally to continue throughout 2023, impacting recommended stocks.
Let’s examine three stocks for your portfolio if the crypto rally continues.
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Coinbase (NASDAQ:COIN), the San Francisco cryptocurrency exchange, introduced an open-source On-Chain Payments Protocol for Coinbase Commerce. This protocol enhances the payment experience, ensuring instant settlement, low fees, and diverse asset support. It aims to streamline cryptocurrency payments globally, addressing volatility and payment complexities for a user-friendly experience.
Recently, the coin experienced a surge in stock value due to renewed cryptocurrency interest and robust Q2 earnings. While serving as an indirect entry to the crypto market, concerns about sustained profitability and growing competition warrant caution amid the recent rally.
Additionally, Coinbase expresses confidence in the approval of a U.S. bitcoin exchange-traded fund by the SEC. The company’s chief legal officer, Paul Grewal, anticipates approval based on strong legal grounds, citing recent developments in the regulatory landscape.
Riot Platforms (RIOT)
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Riot Blockchain (NASDAQ:RIOT) witnessed a surge from $3.4 to $20.7 in July, later correcting to $11. It holds potential for substantial returns even amid a bullish Bitcoin outlook, including potential rate cuts and a Bitcoin spot ETF.
Riot Platforms’ Q3 financial report reveals improvements despite missing earnings and sales estimates. The company produced 1,106 Bitcoins, up from 1,042 in Q3 2022, driven by increased deployed miners. Total revenue surged to $51.9 million compared to $46.3 million in the same period last year.
The company’s power strategy led to a significant rise in power curtailment credits, reaching $49.6 million, compared to $13.1 million in the same quarter last year. Riot reported a year-to-date (YTD) average mining cost of $5,537 per Bitcoin. As of late September, Riot holds $442.3 million in working capital. That includes $290.1 million in cash and 7,327 unencumbered Bitcoins, valued at around $197.6 million.
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Robinhood (NASDAQ:HOOD) saw a 6% drop in after-hours trading following the release of Q3 earnings on November 7.
Despite beating EPS expectations by 1 cent, the California-based company’s revenues of $467 million fell short of Wall Street estimates by 2.4%. Monthly active users (MAU) decreased by 16% to 10.3 million. Additionally, co-founder and Chief Creative Officer Baiju Bhatt sold around 20% of his stake in October.
Despite challenges, Robinhood expressed optimism, revealing plans for brokerage operations in the U.K. and cryptocurrency trading in the E.U. Further, in Q3, the platform expanded services. Specifically, it is introducing 24-hour trading for 95 stocks and enhancing IRA deposit matches to 1%, with a 3% match for gold members.
CEO Vlad Tenev emphasizes a commitment to expanding services and international reach, aiming to meet more customer financial needs. However, some caution remains among investors. Among concerns are the suitability of Robinhood’s IRA products for younger users and the potential impact of cryptocurrency market fluctuations on HOOD shares.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.