How To Get $5 Bitcoin Coinbase

Bitcoin's
(BTC
0.32%)
price striking an all-fourth dimension high of $67,567 last November. Only today it trades at nearly $18,000. The world's summit cryptocurrency lost its luster every bit inflation, rise interest rates, and other macro headwinds drove investors abroad from riskier investments.

That pass up also crushed many Bitcoin-related stocks.
Coinbase

(COIN
2.threescore%), one of the world's largest cryptocurrency exchanges, and
Marathon Digital
(MARA
-1.36%), one of the market'due south height Bitcoin mining companies, both shed more than eighty% of their value this year. Should investors purchase either of these beaten-downward stocks as a turnaround play?

Two dissimilar approaches to the Bitcoin market

Coinbase'southward cryptocurrency substitution served 8.5 million monthly transacting users (MTUs) in the tertiary quarter of 2022. That represented a steep drib from its top of eleven.2 1000000 MTUs in the fourth quarter of 2021.

It generates almost of its revenue from transaction fees. Institutional investors accounted for 84% of its trading volume in the tertiary quarter, while the remaining 16% came from retail investors. It provides access to a wide range of cryptocurrencies, but Bitcoin and
Ether

(ETH
0.41%)
deemed for 31% and 33%, respectively, of its full trading volumes in its latest quarter. The remaining 36% came from other types of crypto assets.

Marathon owns a fleet of well-nigh 69,000 active ASIC miners, but it really missed its original target of bringing 133,000 miners online by the middle of 2022. It generates nearly all of its revenue past directly mining Bitcoin. As of the terminate of November, it was holding 11,757 Bitcoins on its balance sheet.

But both companies face similar headwinds

Coinbase and Marathon are capitalizing on the crypto market in different means, just they face similar challenges. Soaring cryptocurrency prices initially drove more investors to Coinbase, while high Bitcoin prices boosted Marathon's revenue and the value of its ain Bitcoin holdings. Only both companies faced tough slowdowns this year:

Information source: Company websites. YOY = Twelvemonth-over-yr.

Coinbase suffered a much harder landing than Marathon this twelvemonth because it relied on investors actively trading cryptocurrencies. Marathon, however, just kept bringing more miners online and mining more Bitcoin -- then its revenue growth was more tightly tethered to Bitcoin'due south price.

For the full year, analysts expect Coinbase'south revenue to refuse 59% and for Marathon'southward acquirement to dip x%. Nosotros can't put also much faith in those estimates because they're pegged to the unpredictable crypto market, but high interest rates will likely continue to drive investors away from cryptocurrencies and other riskier assets for the foreseeable time to come.

Only which business is more sustainable?

Coinbase generated $three.6 billion in internet income in 2021, but it posted a net loss of $two.1 billion in the first nine months of 2022. It yet held $v.0 billion in greenbacks and equivalents at the stop of the third quarter, but information technology was too shouldering $vii.ane billion in 3 tranches of long-term debt -- and the first $one.four billion tranche matures in 2026. Coinbase won't go bankrupt someday soon, but it could however be overwhelmed past its debt past the finish of the decade if the crypto market fails to recover.

Marathon posted a net loss of $36 million in 2021, followed past an fifty-fifty wider internet loss of $280 1000000 in the first 9 months of 2022. Its total liabilities of $805 1000000 mainly consist of $731 1000000 in convertible notes (with an interest rate of 1% and a maturity engagement of 2026) and a term loan of $fifty million. Marathon only held $62 1000000 in unrestricted cash at the finish of the 3rd quarter, only its Bitcoin holdings -- which information technology can liquidate for greenbacks -- are currently worth about $208 meg.

So for Marathon, the only path frontward is to expand its armada of miners continuously, mine more than Bitcoin, and hope that Bitcoin prices recover to stabilize its residue sheet. But if Bitcoin's prices go on to decline, it volition likely exist unable to offset the rising costs of maintaining its massive mining operations.

Which stock is the better value?

I wouldn't buy either of these stocks correct now -- since it makes more sense to simply invest in Bitcoin instead of either of these capital-intensive businesses -- but Coinbase seems similar a wiser play for 3 reasons.

• Get-go, Coinbase'south enterprise value is worth merely twice this twelvemonth's sales. Marathon still looks a lot pricier at x times sales.
• 2d, Coinbase isn't only pegged to Bitcoin like Marathon: Information technology's better diversified across a wider range of investors and cryptocurrencies.
• Lastly, Coinbase's business isn't dependent on fluctuating miner and energy costs. Information technology only needs to go on its transactions flowing and protect its investors' avails -- something which its disgraced rival FTX failed to practise.