Watch These 5 Crypto Stocks Amid Soft Inflation Data of June
Cryptocurrencies have resumed their northward journey this year after a highly disappointing 2022. On Jul 6, the price of Bitcoin (BTC) touched a 13-month high of $31,450, primarily due to soaring demand from institutional investors. Even though the price of Bitcoin gave away some of its gains last week, it was able to hold the $30,000 level as support.
Prices of cryptocurrencies are inversely related to market interest rates. The primary reason for last year’s disappointment was the Fed’s decision to pursue stringent monetary policies and a rigorous hike in the benchmark interest rate to combat 40-year high inflation.
The situation has reversed this year as the central bank reduced the magnitude of interest rate hikes following a steady drop in inflation. The latest examples are the Consumer Price Index (CPI) and Producer Price Index (PPI) data of June.
Year over year, CPI rose 3% in June, lower-than-the consensus estimate of 3.1%. This marked the lowest annual reading of CPI since April 2021. Notably, the headline CPI reached a 40-year high of 9.1% in June 2022. Thereafter, it has shown a sharp fall.
Year over year, core CPI (excluding volatile food and energy items) climbed 4.8% in June, lower than the consensus estimate of 5%. This marked the lowest year-over-year increase in core CPI since October 2021. Core PPI decreased 0.2% month over month in June, in contrast to the consensus mark of a rise of 0.1%. In May, core PPI increased by 0.1%.
A steady decline in the inflation rate may compel the central bank to move toward the end of the current rate hike cycle. A lower interest rate is expected to benefit growth-oriented sectors like technology, consumer discretionary, and cryptocurrencies.
Our Stock Selection
We have narrowed our search to five stocks with solid crypto exposure and strong growth potential. All five stocks currently carry a Zacks Rank #3 (Hold).
Marathon Digital Holdings Inc. MARA operates as a digital asset technology company that mines cryptocurrency. MARA is singularly focused on the blockchain ecosystem and the generation of digital assets in the United States.
Marathon Digital has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 90 days.
Hut 8 Mining Corp. HUT has recently merged with US Bitcoin Corp to increase its total hash rate substantially. HUT aims to increase its total hash rate to 9.8 EH/s.
Hut 8 Mining has an expected earnings growth rate of 50% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 90 days.
PayPal Holdings Inc. PYPL operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. PYPL’s mobile wallet Venmo also allows users to buy and sell cryptocurrency.
PayPal has an expected earnings growth rate of 19.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 90 days.
Interactive Brokers Group Inc. IBKR is a global automated electronic broker, and among other offerings, routes, executes, processes and trades in cryptocurrencies. The company’s commodities futures trading desk also offers customers a chance to trade cryptocurrency futures.
Interactive Brokers Group has an expected earnings growth rate of 39% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 90 days.
Block Inc. SQ is an online digital and mobile payment platform for consumers and merchants and is the parent company of Square and Cash App. The users of the Cash App can buy, sell, send, and receive Bitcoin. In addition, SQ’s decentralized tbd platform allows developers to build decentralized finance applications to run on programmable blockchains. SQ is also one of the largest Bitcoin investors.
Block has an expected earnings growth rate of 69% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 3.7% over the last 90 days.
Interactive Brokers Group, Inc. (IBKR): Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Block, Inc. (SQ): Free Stock Analysis Report
Marathon Digital Holdings, Inc. (MARA): Free Stock Analysis Report
Hut 8 Mining Corp. (HUT): Free Stock Analysis Report
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