Bitcoinin (Bitcoin -1.91%) price has more than doubled over the past 12 months as the approvals of its first spot price ETFs, the halving of its mining rewards, and the stabilization of interest rates have brought back the bulls. The easiest way to profit from Bitcoin’s rally was to simply buy the cryptocurrency or invest in one of the new ETFs.

However, Bitcoin Rally also lit a fire under stocks like Coin base (COIN -0.18%), one of the world’s leading cryptocurrency exchanges, and Microstrategy (MSTR 1.90%), an aging enterprise software company that began accumulating Bitcoin in 2020. Over the past 12 months, Coinbase shares are up more than 280% and MicroStrategy shares are up more than 270%. Let’s see which of these crypto stocks is the best buy right now.

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Coinbase Business Is Finally Stabilizing

Coinbase generates most of its revenue from transaction fees, so its growth is heavily tied to the broader cryptocurrency market. In 2023, it generated 34% of its trading volume from Bitcoin, 20% from Ether (ETH -1.30%), and 11% of its stable coins. The remaining 35% came from smaller altcoins and other crypto assets.

Coinbase’s revenue soared 514% in 2021 due to stimulus checks, social media buzz and fear of missing out (FOMO) attracted more investors to the cryptocurrency market. However, its revenues fell 59% in 2022 as rising rates burst the speculative bubble.

Its revenue fell another 3% in 2023 as “crypto winter” cooled its business. But in the fourth quarter of 2023 and the first quarter of 2024, its turnover and total revenue increased again sequentially. This stabilization was largely driven by the aforementioned tailwinds for Bitcoin and other cryptocurrencies.

Coinbase has also continued to grow as several of its biggest competitors have been hampered by regulatory challenges and has become the main custodian of most of the market’s new Bitcoin spot ETFs. Analysts expect its revenue to increase 80% for the full year.

Coinbase Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin also returned to positive in 2023 as it aggressively reduced costs. Analysts expect its adjusted EBITDA margin to increase from 31% in 2023 to 49% in 2024 when crypto winter finally ends. Based on these expectations, Coinbase shares still look reasonably valued at 19 times this year’s adjusted EBITDA.

MicroStrategy is still going all in on Bitcoinn

MicroStrategy’s core software business primarily sells data analysis software to large enterprise customers. Over the past decade, it has faced intense competition from cloud-based analytics companies such as Sales forcediversified cloud infrastructure platforms such as Amazon Web Services (AWS) and Microsoft Azure and smaller business intelligence companies.

MicroStrategy has gradually expanded its subscription-based services to offset declining license and support revenue. But this process was slow and the company unexpectedly changed direction in August 2020, purchasing $250 million worth of Bitcoin. By the end of the first quarter of 2024, it had spent $7.54 billion purchasing 214,400 Bitcoins at an average cost of $35,180 per Bitcoin.

At the time of writing, MicroStrategy’s Bitcoin holdings are now worth $13.8 billion – which represents more than half of its $25.3 billion enterprise value.

Bulls believe that MicroStrategy’s Bitcoin accumulation strategy will transform it into a much larger company, even if growth in its core business stagnates. Even so, analysts still expect the company’s revenue to fall about 1% this year as it struggles to sell more software.

The company is also taking on more debt to finance its Bitcoin purchases, and analysts expect it to become unprofitable again based on generally accepted accounting principles (GAAP) this year as it accumulates more impairment costs from its Bitcoin purchases. Analysts expect its adjusted EBITDA to grow 8% this year – but its shares look expensive at 277 times the estimate.

The obvious winner: Coinbase

Coinbase will continue to be a linchpin and benchmark of the growing cryptocurrency market, while MicroStrategy is simply a slow-growing software company that is going all-in on Bitcoin. Coinbase is also growing faster and trades at lower valuations than MicroStrategy. Both stocks could continue to rise as the crypto market recovers, but Coinbase is clearly a more promising long-term investment than MicroStrategy at this point.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions on Amazon. The Motley Fool has positions and recommends Amazon, Bitcoin, Coinbase Global, Ethereum, Microsoft, and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The motley fool has a disclosure policy.

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