• While Bitcoin increased by a little over 150% in 2023, Marathon Digital, Coinbase, MicroStrategy, and the Grayscale Bitcoin Trust all saw increases of over 300%.
• They were among the best-performing stocks in the United States throughout the year.
• Speaking of the market’s collapse in 2022, Marathon CEO Fred Thiel stated in an interview this week, “It was pretty dire times.”

The stock market proved to be the most profitable wager for cryptocurrency bulls in 2023.

Although the value of bitcoin increased by over 150% over the course of the year, the closely related companies’ shares—Coinbase, MicroStrategy, and the Grayscale Bitcoin Trust—performed much better, increasing in value by over 300%. Marathon Digital, a Bitcoin miner, increased by 688%.

These equities have not only beaten the main cryptocurrency, but they have also been among the top gainers in the entire US market. The four equities linked to bitcoin were among the top eight performers among publicly traded U.S. companies with a market value of at least $5 billion, as reported by FactSet.

The Federal Reserve’s decision to scale down its interest rate hikes made riskier assets seem more appealing, which was one of the main factors driving the price of bitcoin this year. The impending bitcoin halving, which is set for May 2024 and occurs every four years, also supported prices. The mining incentive is divided in half during the halving process, which caps the amount of bitcoin available.

The possibility of a burst of bitcoin exchange-traded funds emerging in the new year spurred more buying. As of Tuesday, the price of bitcoin has risen to $42,683, providing investors who bought at the beginning of the year when it was only worth $16,500 with a huge profit. However, the top cryptocurrency is still 38% behind its November 2021 record high of about $69,000.

The best-performing stock this year among bitcoin-related companies valued at $5 billion or more was Marathon, a mining company that barely surpassed that market cap threshold last week after seeing a 125% increase in December as of Tuesday’s close. The shares increased by another 12% on Wednesday.

By this time last year, Marathon was barely surviving. The company was experiencing a quarter that ended with a nearly $400 million loss on sales of only $28.4 million due to declining bitcoin prices, a power outage at its Montana facility, and Marathon’s financial involvement with Compute North, a bankrupt miner.

Because running the supercomputers requires a lot of energy, mining Bitcoin is a costly business. Even while producers’ energy bills don’t get much better, a decline in bitcoin prices results in a significant drop in the money they make from selling the coins they mine.

According to Thiel, the business was in a good situation because it could sell its shares and just had a convertible note as debt.

In 2023, things have drastically improved. Marathon announced last month that its third-quarter net income was $64.1 million, with revenue up $97.8 million over the same period last year. The business is currently growing, and it just revealed that it has paid $178.6 million to acquire its first two completely owned bitcoin mining facilities, one in Nebraska and the other in Texas.

Diverse Income Streams

Aside from the mining industry, Coinbase has been the best-performing cryptocurrency stock in the United States this year, rising 386% as of Tuesday’s closing. 3.8% was the Wednesday increase.

Coinbase has long been a well-liked option to purchase and trade cryptocurrencies in its native market because it is the only significant publicly traded cryptocurrency exchange in the United States. However, a report from research firm Kaiko in late November stated that Coinbase gained market share during non-U.S. trading hours due to the difficulties at Binance, the biggest exchange in the world.

The development amounted to “a vindication of the long-term strategy that we’ve taken to focus on compliance, make sure we were building a trusted company,” Coinbase CEO Brian Armstrong told CNBC shortly after Zhao’s plea agreement.

When the market was booming in 2021 and ordinary people were buying all kinds of digital currencies, including gimmicks like Dogecoin, Coinbase’s revenue and stock price were still far lower than they were. However, after implementing severe cost-cutting measures beginning last year and continuing until early 2023, the company has stabilized.

In addition to Bitcoin, Coinbase provides investors with some additional options. Only 37% of Coinbase’s transaction income in the third quarter came from bitcoin; the remaining 46% came from other crypto assets, ethereum, and 18% from bitcoin. Furthermore, because of rising interest rates, the total revenue from interest and stablecoins (obtained through USDC reserves) more than doubled to $212 million in the most recent quarter.

Less than half of Coinbase’s net revenue now comes from transaction revenue, down from 96% during the company’s 2021 public market launch.

With the acquisitions, Marathon’s mining portfolio grew by 56% to a capacity of 910 megawatts.

Sharks are Joining the Party

In addition to holding formal discussions with other asset managers regarding the launch of bitcoin ETFs, the Securities and Exchange Commission met with Grayscale in November.

The commencement of such sessions followed an August ruling by an appeals court in favor of Grayscale in a dispute against the regulator, which had objected to the company’s initiatives on the grounds that investors would not receive enough protection. Some big money managers have started to establish their own funds, including Invesco, Fidelity Investments, and BlackRock.

The “hopeful approval” for ETFs, according to Grayscale CEO Michael Sonnenshein, will attract new players, particularly investment advisors who manage almost $30 trillion in the United States but are subject to buying limitations.

Saylor is also upbeat about a mark-to-market accounting rule that would alter how businesses record cryptocurrency holdings and is scheduled to take effect in 2025 (though businesses may choose to implement it sooner). Cryptocurrency will be in a different category and corporations will mark it up or down depending on where it’s trading, rather than being categorized as intangible assets that must be marked down if the value decreases below the purchase price.

According to Saylor, the new law encourages businesses with cash on hand totaling billions of dollars to invest a portion of that sum in Bitcoin.

A Lucrative Year for Bitcoin Investors

For investors in Bitcoin and related stocks, 2023 was a year of lucrative returns and reaffirmed the potential of cryptocurrencies in the broader financial market. This year not only marked a recovery from the lows of 2022 but set a new trajectory for growth and innovation in the crypto space.

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