In this article we will take a look at the top hedge funds buying Coinbase and other bitcoin stocks. You can skip our comprehensive analysis of the crypto industry and go directly to Hedge Funds are Buying Coinbase and These 5 Bitcoin Stocks.
Hedge funds are loading up on crypto stocks as the market for cryptocurrencies grows into a multi-trillion dollar monster that shows no signs of being tamed. The positive investor sentiment around blockchain, and digital-only currencies in general, seems driven by crypto stock rallies over the past year and the high returns offered to those that have historically backed the rise of the new technology. The price of Bitcoin, a blockchain-based cryptocurrency launched in 2008, soared to over $65,000 last week, although it has pulled back by 15% since.
However, Bitcoin is still trading 90% up above what it was worth this time last year. The bull market on crypto is also minting millionaires and billionaires. According to a report by multinational financial services firm PwC, the average crypto hedge fund has returned more than 30% in the past two years. In addition, a study by London-based investment advisory Elwood Asset Management earlier this year found that the crypto asset management market is expected to grow at a compound annual growth rate of 20% in the next five years.
The increased hedge fund interest around crypto, above everything else, is based on the increasing awareness about the new technology that has long been championed by young venture capitalists and is finally becoming mainstream. Some of this growth is attributed to retail investors. Last week, a survey by The Charles Schwab Corporation (NYSE: SCHW) detailed that 51% of investors aged between 18 and 37 owned or traded cryptocurrencies. However, the number dropped down to just over 8% among investors aged 55 or above.
The generation gap illustrated in the survey has closed down somewhat since San Francisco-based cryptocurrency exchange platform Coinbase Global, Inc. (NASDAQ: COIN) went public earlier this month with a market capitalization of more $86 billion. Although there were initial murmurings about the company being overvalued from financial experts like Peter Cohan and David Trainer, they seem to have been pushed to the back burner over the past few weeks as several hedge funds have been reported to have holdings in crypto-related stocks.
Cryptocurrencies are set to break new records as major banks, companies and investors throw their weight behind them, adding to their legitimacy and crushing all skepticism, rumors and mistrust that once prevented their global acceptance. For example, Paypal Holdings, Inc. (NASDAQ: PYPL) earlier this year stunned financial markets when it announced its plans to allow its customers to checkout using cryptocurrency. Paypal Holdings, Inc. (NASDAQ: PYPL) customers can hold bitcoin and other cryptocurrencies in their PayPal digital wallets and can also convert their holdings into fiat currencies. With over 360 million users and 147 elite hedge funds having stakes in the company, Paypal Holdings, Inc. (NASDAQ: PYPL) fully integrating crypto on its platform is one of the major boosts in trust for the cryptocurrency in general.
Another example is Jack Dorsey’s Square, Inc. (NYSE: SQ), which bought $170 million in Bitcoin earlier this year, raising its hold in crypto to 5% of the company’s cash and equivalents. Dorsey has been a major proponent of crypto and regularly shares his thoughts on the power of cryptocurrency on his Twitter. In February, Square, Inc. (NYSE: SQ) said that 3 million people transacted in bitcoin through its Cash App in 2020, while the app saw 1 million new users who initiated bitcoin transactions in January 2021.
Which Hedge Funds are Buying Coinbase and Other Bitcoin Stocks?
According to crypto news platform Coindesk, Third Point LLC, a New York-based hedge fund founded by billionaire Daniel Loeb in 1995, has a custody deal with Coinbase Global, Inc. (NASDAQ: COIN), and five funds from the fund hold money with the crypto exchange. Business news publication Bloomberg claims that London-based hedge fund Brevan Howard Asset Management has plans to invest 1.5% of its $5.6 billion in crypto stocks. Howard joins Boston-based Tudor Investment Corporation in betting big on crypto assets.
New York-based Ark Investment Management has also increased holdings in Coinbase Global, Inc. (NASDAQ: COIN) recently. Ark is owned by Bitcoin bull Cathie Wood, who predicted the Tesla, Inc. (NASDAQ: TSLA) announcement stating the automaker would buy more than $1 billion in Bitcoin and start accepting it as payment for vehicle sales. Reputed finance institutions with a history of smart investment advice, like The Goldman Sachs Group, Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS), have also started offering access to crypto-related investments.
Cathie Wood of ARK Investment Management
Hedge funds are going through massive changes, thanks to the changing financial landscape. The entire hedge fund industry is feeling the reverberations of the changing financial dynamics. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
These Top Hedge Funds are Buying Coinbase and Other Bitcoin Stocks
With this context in mind, here is our list of the 10 best crypto stocks to buy as hedge funds increase their holdings into digital currencies.
10. Silvergate Capital Corporation (NYSE: SI)
Number of hedge fund holders: 20
Silvergate Capital Corporation (NYSE: SI) is a California-based bank holding company that provides financial services to individuals and businesses in the United States and abroad. The products that the firm markets include interest and noninterest bearing demand accounts, money market and savings accounts, family real estate loans, commercial real estate loans, construction loans, and cash management for digital currencies. It was founded in 1988 and is placed tenth on our list of 10 best crypto stocks to buy amid hedge fund interest.
On March 23, the share price of the firm jumped more than 2% after it announced Coinbase Global, Inc. (NASDAQ: COIN) as a custodian for SEN Leverage, a product offered by Silvergate that offers institutional investors with access to capital through loans collateralized by bitcoin. On March 29, it added Fidelity Digital to the custodian list for SEN Leverage.
At the end of the fourth quarter of 2020, 20 hedge funds in the database of Insider Monkey held stakes worth $225 million in the firm, up from 12 in the preceding quarter worth $68 million.
9. Marathon Digital Holdings, Inc. (NASDAQ: MARA)
Number of hedge fund holders: 11
Marathon Digital Holdings, Inc. (NASDAQ: MARA) is a Nevada-based company that is primarily in the business of mining cryptocurrencies. The firm is focused on the enhancement of digital assets through the mining of blockchain-based currencies. It has a market cap of more than $4.25 billion and posted more than $4 million in annual revenue in December 2020. The premier crypto mining data centre of the firm has a 105 megawatts capacity. Marathon was founded in 2010 and is placed ninth on our list of 10 best crypto stocks to buy amid hedge fund interest.
On March 31, Marathon announced that it had signed an agreement with DMG Blockchain Solutions to license a new technology championed by DMG for crypto miners in North America. The announcement followed the formation of a bitcoin mining pool based in North America and led by Marathon that is fully compliant with US regulations.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in the firm with 740,100 shares worth more than $7.7 million.
8. Riot Blockchain, Inc. (NASDAQ: RIOT)
Number of hedge fund holders: 7
Riot Blockchain, Inc. (NASDAQ: RIOT) is a Castle Rock-based cryptocurrency mining firm that images in the industrial-scale mining of Bitcoin. The firm is one of the largest publicly traded crypto-mining operations in the United States with 7,000 employees dedicated to the purpose. It was founded in 2000 and was formerly known as Bioptix. It is placed eighth on our list of 10 best crypto stocks to buy amid hedge fund interest. Riot plans to expand operations in the next few months by increasing the mining hash rate while decreasing the cost of production.
On April 12, the share price of Riot climbed close to 6% after it reported the production of 187 bitcoin in March, an 80% year-on-year production increase. The firm also detailed that it had produced 491 bitcoin in the first quarter of 2021, up 7% from the same period last year. On April 8, Riot said it had acquired Whinstone US, a colocation data centre firm, for $651 million.
At the end of the fourth quarter of 2020, 7 hedge funds in the database of Insider Monkey held stakes worth $5 million in the firm, up from 4 in the preceding quarter worth $1 million.
7. Canaan Inc. (NASDAQ: CAN)
Number of hedge fund holders: 4
Canaan Inc. (NASDAQ: CAN) is a Hangzhou-based company that makes special microprocessors used in high-powered ordinary computers and supercomputers. These computers are used for cryptocurrency mining around the world. Canaan microprocessors are specially designed for blockchain servers. The firm was founded in 2013 and is placed seventh on our list of 10 best crypto stocks to buy amid hedge fund interest. Canaan also owns data centres and other technology-related operations in China.
On April 22, the firm announced that it had signed a deal with Sydney-based digital provider Mawson Infrastructure for the production and delivery of 11,760 bitcoin mining machines. On April 23, Canaan partnered with a Japanese firm to launch artificial intelligence-powered facial recognition tools and special AI chips in the East Asian nation.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in the firm with 414,822 shares worth more than $2.4 million.
6. NVIDIA Corporation (NASDAQ: NVDA)
Number of hedge fund holders: 88
Nvidia Corporation (NASDAQ: NVDA) is a Santa Carla-based chipset making company that specializes in chips for high-powered computer operations like graphics-heavy video games and bitcoin mining. The firm has interests in the cloud services sector as well. NVIDIA has a market cap of more than $350 billion and posted more than $16.6 billion in annual revenue in January 2021, up more than $6 billion compared to the previous year. It was founded in 1993 and is placed sixth on our list of 10 best crypto stocks to buy amid hedge fund interest.
On April 15, financial services firm Raymond James upgraded NVIDIA stock from Outperform to Strong Buy, raising the price target from $700 to $750. On April 20, Bank of America maintained a Buy rating on NVIDIA with a price target of $700 despite the announcement of the UK government to intervene in a proposed $40 billion Softbank Arm chip unit purchase by NVIDIA.
At the end of the fourth quarter of 2020, 88 hedge funds in the database of Insider Monkey held stakes worth $8.6 billion in the firm, up from 82 in the preceding quarter worth $7.6 billion.
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Disclosure: None. These Top Hedge Funds are Buying Coinbase and Other Bitcoin Stocks is originally published on Insider Monkey.
