In a recent report published on Monday, May 22, 2023, investment banker Berenberg said that investors who want better exposure to the coin market are better off investing in MicroStrategy shares.
The report comes at a time when US regulators are clamping down on cryptocurrency trading platforms because they have classified most crypto tokens as unregistered securities.
The Berenberg report stated that MicroStrategy shares (MSTR) will give investors better exposure to the coin market than Coinbase shares (COIN). This is attributed to the fact that macro drivers favor MicroStrategy over Coinbase.
Investors should be long on MSTR and short on COIN
Comparing the shares of the two companies, the report said that there is a correlation of 0.96 between the two stocks. However, it stated that investors should look at MSTR as an alternative to COIN if they’re bearish on Coinbase shares, highlighting that there are many investors who are actually bearish on Coinbase shares. The report said that the two shares can be paired by shorting COIN while longing MSTR.
It stated that the advantage that MicroStrategy shares have over those of Coinbase is in the business model employed by the former. MicroStrategy has been accumulating bitcoins over the years. The company currently owns 140,000 bitcoins, worth about $3.8 billion. It added that Microstrategy is also at an advantage in terms of the recent de-dollarization of the world economy. It said that even though this has portrayed Bitcoin in a good light, companies such as MicroStrategy will benefit from it, and it inferred that macro drivers are bullish on MSTR.
Enforcement action coming for Coinbase
It added that the weakening of the USD is beginning to cast BTC in a positive light among many investors. The US regulators consider most crypto tokens to be unregistered securities. Crypto trading platforms have recently come under intense scrutiny, with Coinbase in the sights of regulators.
The report said that Coinbase is likely to face enforcement actions considering the defiant stance of its management in light of regulators’ insistence that the company falls short of US securities law.
“Coinbase’s revenues at risk in the event of an enforcement action are disproportionately profitable relative to its total revenue,” the report added.
According to the investment bank, the rating price target for Coinbase shares is $55, while the buy rating price of MicroStrategy shares is $340.