Investors looking to gain exposure to the cryptocurrency sector may find MicroStrategy (MSTR) an attractive alternative to Coinbase (COIN), according to a report from Germany investment bank Berenberg on Monday. The report suggests that investors who are very bearish on Coinbase shares should look at pairing it long with MicroStrategy, noting that the correlation between the two stocks since Coinbase’s direct listing in April 2021 is 0.96.
The U.S. Securities and Exchange Commission (SEC) has classified most crypto tokens as unregistered securities, making the platforms that enable their trading vulnerable to additional regulatory actions. The commission, however, has clarified that Bitcoin (BTC) is a commodity rather than a security. This makes MicroStrategy, which has a unique business model focused on the acquisition and holding of Bitcoins, an attractive option in the current environment, according to analysts Mark Palmer and Hassan Saleem.
MicroStrategy is currently holding 140,000 BTC worth around $3.8 billion at current prices. The bank believes that macro drivers of demand for Bitcoin are bullish for MicroStrategy shares, and investor concern about the weakening of the U.S. dollar’s dominance has helped to shine a more positive light on Bitcoin in recent months.
SEC Commissioner Gary Gensler’s comments about Coinbase and its non-compliance with securities laws, as well as the company’s defiant tone regarding the scrutiny it has received, may serve to accelerate the filing of any enforcement action against it. The report also states that Coinbase’s revenues at risk in the event of such an action are disproportionately profitable in comparison to the company’s total revenue.
Berenberg has a hold rating on Coinbase shares with a price target of $55, and a buy rating on MicroStrategy shares with a price target of $340.