These stocks could help you ride the next crypto surge
Bank of America has picked out a number of stocks that could help investors get a slice of the cryptocurrency pie. Here they are.
Digital tokens on the rise?
Despite what some objectors and sceptics might say, it looks like cryptocurrency is here to stay.
Bitcoin has recently started heading upwards again. The token, which is the most popular in the world, recently passed the key $57,000 level – the highest levels since May. April’s $65,000 all-time high is still the target for BTC, but the industry is not just Bitcoin.
There are hundreds, thousands, of other digital tokens available. The industry’s collective valuation is currently north of $2 trillion – higher than the GDP of Canada with its bountiful natural resources.
Coins like Ether, Ripple, Cardano and even meme-based internet favourite Dogecoin, all have their own fans, representing billions in capital.
Cryptocurrencies seem like they’re becoming more resilient to outside pressures too. For example, Bitcoin’s current high performance flies in the face of China’s recent crypto ban. Before, such a measure would have sent the token spiralling downward. Now, even a flat out ban from one of the world’s foremost crypto markets isn’t enough to slow it down.
That being said, digital token prices can still show high volatility. Many investors and traders are still unsure if it’s a smart investment. Others prefer to stick with old school wealth stores like gold. But many are finding crypto a worthwhile pursuit. It’s basically down to how much volatility you can stomach.
But coins do not just generate themselves. To operate, the crypto industry requires an extensive ecosystem. It incorporates everything from technology providers, blockchain developers, payment platforms and plenty in between.
For investors to get involved in the next crypto gold rush without committing to coins, there are ways they can get involved. Of course, it goes without saying that any investments carry risk of capital loss. Investing should only be undertaken if you are comfortable taking any losses.
With that in mind, Bank of America analysts have selected several stocks they believe could offer investors value as the crypto industry grows.
Bank of America’s crypto stocks to watch
“A new generation of companies for digital assets trading, offerings and new applications across industries, including finance, supply chain, gaming and social media has been created. And yet we’re still in the early innings,” Bank of America said in a note, as reported by CNBC.
The bank’s digital finance stock selections look at the wider cryptocurrency sector.
Let’s start with power. Cryptocurrency mining, the process of minting fresh coins, is power intensive. Very power intensive. In fact, in 2020, Bitcoin mining alone used as much energy as Sweden.
According to Bank of America, nuclear power firms could be ready to pounce on the crypto sector. Environmental concerns around token mining’s emissions could push miners to look for low-carbon alternatives to their current options. With low emissions and round-the-clock reliability, nuclear could be the ideal fuel source for crypto mining.
With that in mind, BoA suggests Exelon, NRG Energy and Vistra could be energy companies to watch if they move into the crypto space.
Let’s talk data centres. Since China prohibited crypto mining in its territories, there’s been a mass exodus of mining operations. It looks like North America might become mining next hotspot.
“As digital asset mining migrates to North America due to China’s near complete ban of mining activities, public data-centre companies could view this niche market as an opportunity,” BoA analysts said.
A data centre boom may be on the way. To capitalise on this, Bank of America analysts recommend two stocks: Digital Reality and Equinix.
“Greater focus on the energy consumption of digital asset mining could increase demand for data centre operators with greater renewable energy sources,” the analysts said. “Equinix data centres are powered with 37% renewable energy with a target of 100% over the next decade.”
Payment platforms and banks should also be considered.
PayPal in particular is a “must own” for Bank of America.
“We view [Paypal] as a scarce asset with accelerating structural tailwinds, while the company is well on its way to transforming its digital wallet/app into a financial ‘Super App’ for its massive global consumer base,” the bank said.