With Bitcoin (BTC 5.09%) soaring by more than 110% this year, and with many other cryptocurrencies following close behind, the growing consensus appears to be that the long “crypto winter” that kept a lid on prices may finally be over. In mid-October, for example, Wall Street giant Morgan Stanley (MS) suggested that “crypto spring” could soon be on its way.
This profound change in market sentiment could open the door for huge gains for select cryptocurrencies, as well as for a handful of stocks highly leveraged to the crypto industry. With that in mind, I’ve picked out two cryptos and one stock that could be potential accumulation targets as we head into 2024.
The obvious pick here is Bitcoin. This was the one cryptocurrency mentioned by Morgan Stanley’s wealth management team, and the one that has been getting a lot of attention from institutional investors throughout the year. A major catalyst will be the launch of the first-ever spot Bitcoin exchange-traded fund (ETF) for the U.S. market, now scheduled for the first quarter of 2024. This product launch could lead to a tsunami of new money flowing into Bitcoin. As much as 10% of all Bitcoin circulating in the world could soon be held by spot Bitcoin ETFs.
And there’s a second, potentially even bigger factor: The upcoming Bitcoin halving, now scheduled for April 2024. As Morgan Stanley points out, this halving event (in which the mining reward for Bitcoin miners is cut by one-half) will be the big kick-off event for “crypto spring.” In three previous halving cycles, Bitcoin has rallied strongly to new highs, and the expectation is that the same phenomenon may occur next year as well. Investment firm Bernstein, for example, recently put out a $150,000 price target for Bitcoin.
If you’re looking to diversify your exposure away from Bitcoin, my top pick is Solana (SOL 9.92%), which is already up a head-spinning 317% this year. And that might just be the start. Analysts are rushing to put out even higher price targets for Solana. One valuation model calls for Solana to skyrocket from its current level of $40 to $500 or even $1,000.
It’s easy to dismiss Solana as just a trendy momentum play. However, I think there is a compelling narrative around Solana, which has the potential to displace Ethereum (ETH 1.91%) as the top Layer 1 blockchain. On that basis alone, the market cap disparity between Solana ($17 billion) and Ethereum ($225 billion) should start to narrow. Put another way, is Ethereum really 13 times more valuable than Solana?
For nearly two years, we’ve been hearing about Solana as a potential “Ethereum killer,” and this process may finally be happening. There have been some big wins for Solana thus far in 2023. In April, Solana launched the first-ever crypto phone (known as the Saga) as part of its new mobile crypto strategy. Then, in early September, Solana signed a partnership agreement with Visa on a major payment project. If it continues with more big wins in 2024, then things could be very sunny indeed for Solana.
Finally, there’s Coinbase (COIN), which is a play on a broad-based crypto recovery. The basic narrative here is that “crypto spring” will bring retail investors back to crypto trading. It will pump up the number of daily active users on the Coinbase platform, and it will boost overall trading volume.
Right now, approximately 20% of all trading that takes place on Coinbase involves Bitcoin, so any market rally for Bitcoin could have huge follow-on effects for Coinbase. At the same time, Coinbase is moving ahead with new projects, such as the recent launch of its Base blockchain, to keep ahead of competitors in the area of decentralized finance.
While there is reason to hope for the return of the next big crypto bull market rally, it is far from guaranteed. Several things could go wrong. The SEC, for example, might decide to drag its feet on the approval of a spot Bitcoin ETF. Or the Bitcoin halving might end up over-promising and under-delivering. After all, past performance is no guarantee of future performance, and there’s no ironclad law that says Bitcoin must rally with every halving.
By investing in cryptos or stocks with solid, long-term prospects, and by diversifying as much as possible, you can help to reduce (but not eliminate) the inherent risk and volatility involved with investing in crypto. For me, Bitcoin, Solana, and Coinbase offer the optimal mix of risk and reward, and are intriguing investment targets heading into 2024.