TD Cowen has begun covering four publicly traded crypto treasury companies whose mission is to buy and hold cryptocurrencies to increase shareholder value. Almost a year ago, these companies were the latest crypto maniacs, when investors were chasing profits as Bitcoin prices slumped. Dozens of companies are rushing to position themselves as the next play, often going beyond Bitcoin and across a range of crypto assets. For many, it was inevitable that most players would not last, but those that did survive would represent attractive long-term opportunities for investors. TD Cowen has now identified four, saying the sub-sector “deserves particular focus”. On Thursday, we initiated coverage on Strive, nakamoto Holdings, The Smarter Web Company (all Bitcoin accumulators), and SharpLink (invested in Ethereum), all with buy ratings. We also reiterated our Buy rating on Strategy, a pioneer in Bitcoin accumulation strategies. “These companies best represent the nascent industrial sector, with operations that add meaningful value to investors and their underlying digital asset ecosystems,” analyst Lance Vitanza said in a note. “We believe this sector is likely to be here to stay and could gain increased investor attention over time.”Each stock has fallen more than 50% in the past six months following a macro-driven crypto price decline. Investors expect prices to recover, buoyed by signals of institutional appetite for cryptocurrencies, such as Morgan Stanley launching its own Bitcoin ETF, MSBT, this week. TD Cowen sees more than 100% upside potential for Strive and SharpLink, around 200% upside potential for Smarter Web, and more than 300% upside potential for nakamoto. The company says the upside potential for treasury companies is amplified compared to exposure through spot and ETF holdings. They increase their holdings of crypto assets per share over time, take advantage of institutional leverage not normally accessible to retail investors, reinvest operating cash flow back into the business, and take advantage of self-reinforcing growth loops (also known as the “flywheel effect”). “Digital assets are moving from a speculative vehicle to a fundamental building block of the global financial system,” Vitanza said, noting that Bitcoin as digital gold and Ether as digital picks and shovels could facilitate the tokenization of $100 trillion in financial assets. “Rather than looking at Bitcoin and (Ether) exposure solely through either spot holdings or ETPs (exchange traded products), we argue that well-run (digital asset treasury companies) may offer better long-term exposure.” —CNBC’s Michael Bloom contributed reporting.
