German investment bank, Berenberg, has recently published a report highlighting MicroStrategy (MSTR) as an attractive alternative to Coinbase (COIN) for investors seeking exposure to the cryptocurrency sector. They suggest that investors who possess a bearish outlook on Coinbase shares and are looking to short the stock should consider pairing it with long MicroStrategy. Since Coinbase’s public debut through a direct listing in April 2021, the report points out that their correlation stands at an impressive 0.96.
This viewpoint stems from the fact that the U.S. Securities and Exchange Commission (SEC) has classified most crypto tokens as unregistered securities, making them and any associated platforms, like Coinbase, vulnerable to further regulatory action. However, the SEC and other regulators have historically classified bitcoin (BTC) as a commodity, rather than a security.
The report suggests that MicroStrategy, known for its unique business model focusing on acquiring and holding bitcoins, offers more appeal in the current landscape. Analysts Mark Palmer and Hassan Saleem explain that the company currently holds 140,000 BTC, valued at roughly $3.8 billion.
Berenberg cites the macro drivers of demand for bitcoin as favorable for MicroStrategy’s shares, with concerns over de-dollarization – or the decreasing dominance of the U.S. dollar – helping draw more attention to bitcoin recently. Meanwhile, remarks from SEC Commissioner Gary Gensler regarding Coinbase’s noncompliance with securities laws and the defiant tone from its management team indicate the pathway for enforcement action against the company.
In the event of enforcement action, Coinbase’s revenues, disproportionately profitable compared to its total revenue, could be at risk. As a result, Berenberg maintains a hold rating on Coinbase shares with a $55 price target, while giving MicroStrategy a buy rating with a $340 price target.
While the cryptocurrency sector always generates differing opinions, a light of skepticism lingers on Coinbase due to the possibility of future regulatory actions. This skepticism has placed MicroStrategy in the spotlight as an attractive alternative for crypto-familiar investors, offering a commodity-focused business model that steers clear of regulatory uncertainties.
However, it is essential for investors to remain well-informed and tread cautiously before making any financial decisions, as both MicroStrategy and Coinbase carry their respective risks and rewards in the ever-evolving cryptocurrency market.
Source: Coindesk
