The blockchain-powered cryptocurrency market, which once gained momentum, has been witnessing a topsy-turvy situation since the beginning of 2022. The market is flashing red, with most digital currencies plummeting, including bitcoin (BTC) and ethereum (ETH), the most popular ones.

According to data from Trading View, total crypto market capitalization plummeted to $781 billion at the beginning of November 2022, which marked the lowest point since December 2020. The crypto market continued to be volatile and reached a market capitalization of around $764.9 billion at the end of Dec 19. Furthermore, BTC and ETH closed at $16,439.68 and $1,167.61 on Dec 19, plunging almost 14% and 9.2% in the last two months, respectively.

The current downfall in the crypto market is primarily attributed to the massive decline in the major indexes of the U.S. equity market, which has been suffering from the Federal Reserve’s aggressive stance on cutting down the inflation rate through continuous interest rate hike. In 2022, the Fed spiked interest rates by 75 basis points four times and by 50 basis points at its recent Federal Open Market Committee meeting. The Fed will continue to hike interest rates in order to drag down inflation to its target of 2% at best by 2025.

The latest crash of the crypto exchange, FTX, also remains another big reason behind the downturn in the crypto market. Due to a lack of liquidity and mismanagement of funds, FTX filed for Chapter 11 last month. This has been taking a toll on BTC, ETH and other digital currencies.

Upside Potential in the Crypto Space

Despite these macro headwinds, the crypto market holds huge upside potential. Per a report by Grand View Research, the global cryptocurrency market is expected to witness a CAGR of 12.2% between 2022 and 2030.

Digital and contactless trading and payments via cryptocurrencies are expected to gain further momentum.

Further, the great hedging opportunities that digital currencies, especially bitcoins, offer to investors against inflation are expected to continue bolstering their adoption rate as well as drive growth in the cryptocurrency market.

Additionally, blockchain technology minimizes the risks of monetary losses, double counting and hacking as it leverages a distributed consensus that makes tampering with the records very difficult.

Furthermore, cryptocurrencies are eventually becoming mainstream in the process of peer-to-peer payments, payments for Web3 applications and remittance transactions, among others.

Also, the growing demand for alternative currency as a result of the ongoing pandemic remains a tailwind. Many companies worldwide are now adopting the idea of cryptocurrencies as payment options and increasing their bitcoin holdings.

Considering these growth factors, the cryptocurrency market is expected to rebound strongly once the impact of the abovementioned headwinds subsides.

Against this backdrop, here we focus on three stocks namely

PayPal


PYPL

,

Block


SQ

and

Marathon Digital


MARA

, which have wide exposure to the said market. These stocks have the potential to outshine once the market bounces back.

PayPal:

It is one of the well-known bitcoin-related stocks that should be focused on. Notably, this leader in digital payment processes helps merchants to accept crypto payments. It offers a service that allows its customers to buy, hold and sell cryptocurrency directly from their PayPal account. Additionally, it provides a feature called Crypto on Venmo, which lets Venmo customers buy, hold and sell cryptocurrency directly within the Venmo app. Customers can also check cryptocurrency trends from the app. It also offers a feature called Checkout with Crypto, which lets customers convert their cryptocurrency holdings seamlessly into fiat currency at the time of checkout.

These apart, this Zacks Rank #3 (Hold) company’s acquisition of digital asset security technology provider — Curv — remains noteworthy. Further, PayPal’s strong efforts toward expanding its footprint in the global crypto space are encouraging. It offers cryptocurrency service in the United Kingdom, which allows users to buy, hold and sell digital currencies like bitcoin, bitcoin cash, ethereum or Litecoin directly from their PayPal account.

Additionally, the company’s recent partnership with ConsenSys is another positive. Per the terms, PayPal has been added as an option for a cryptocurrency transaction to ConsenSys’ digital cryptocurrency wallet – MetaMask, with the help of which the latter’s users are now able to buy and transfer Ether seamlessly by logging into their PayPal accounts.

Block:

It is a well-known player in the cryptocurrency market with its wide offerings associated with bitcoin transactions. The company derives the majority of its revenues from bitcoin transactions. In third-quarter 2022, bitcoin revenues accounted for 39% of the total revenues.

Notably, this Zacks Rank #3 company facilitates the buying and selling of bitcoins via its Cash App. Further, Block intends to develop a bitcoin mining system in a bid to bolster its presence in the cryptocurrency market. The company strives to carry out the process of mining, maintaining, setting up and purchasing bitcoin efficiently with its bitcoin mining system. The company has already hired veterans in crypto mining engineering as well as a manager to carry out the project of its mining unit.

Its recent investment in an Africa-based renewable bitcoin miner namely Gridless remains noteworthy. We note that Block along with Stillmark led a $2 million seed funding round in Gridless.

Marathon Digital:

It is one of the largest enterprise bitcoin self-mining companies in North America. It is benefiting from the increasing deployment of miners, growing production of bitcoins, robust bitcoin holdings and a hike in its hash rate. Marathon Digital is now recognized as the second-largest holder of bitcoin in the world.

On the third-quarter 2022 earnings call, this currently Zacks Rank #3 player revealed that it now holds 11,300 BTC in total. MARA added 616 BTC to its holdings in the same quarter, following which it produced 615 BTC in October and 427 BTC in November. Thus, its quarter-to-date holdings are 1,087 BTC.

You can see


the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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