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The crypto hype cycle is notoriously unpredictable. Investors swing from Bitcoin to Ethereum to relatively niche tokens like Shiba Inu in a matter of days. Day traders simply have no tools to predict these rapid shifts in market momentum, which is why long-term investors need a different strategy.
Instead of trying to pick the next big thing or predict market sentiment, I believe investors could be better off investing in crypto service providers. These service providers benefit from the size and frequency of crypto transactions rather than the performance of individual assets.
Here’s a closer look at how this strategy could deliver stunning returns for patient investors.
Crypto service providers
Service providers act as getaways to these new digital assets. In other words, these companies provide the tools investors need to adopt blockchain technology.
Crypto exchange Coinbase is a perfect example. The company provides an easy-to-use platform for consumers to buy and trade cryptocurrencies. Soon, the company also plans to launch a marketplace for non-fungible tokens, or NFTs.
Coinbase generates revenue by taking a small cut from every transaction on its platform. This means the volume and frequency of transactions matter much more than the popularity or performance of any individual asset on the Coinbase exchange.
The platform is on track to generate roughly $10 billion in revenue this year, and the stock is up 50% since July this year.
Coinbase, however, isn’t listed on the Canadian stock exchange. Local investors should consider a Canada-listed service provider such as Banxa Holdings (TSXV:BNXA).
Australia-based Banxa Holdings offers a fiat-to-crypto onramp for enterprises. In other words, it helps crypto exchanges and wallets convert their users’ traditional currencies into crypto currencies.
Banxa has gone through the process of complying with local regulations in several countries. That means its enterprise customers can rely on its Anti-Money Laundering and Know Your Customer procedures while onboarding new users. Banxa, in turn, takes a cut of the transaction for its efforts.
Business has been booming. In its most recent fiscal year (ended June 30), Banxa reported a 893% year-on-year surge in total transaction volume and a 577% surge in revenue over the same period.
The company currently has 72 enterprise clients and is on the verge of being cash flow positive. Meanwhile, its stock is down 58% from an all-time high to $3.4. This makes it the perfect opportunity for investors seeking exposure to the crypto sector.
The crypto market’s moods are hard to predict. Bitcoin dominated the headlines in 2020, but this year, Dogecoin and Shiba Inu are clearly more “trendy.” Investors shouldn’t attempt to predict the next big trend. Instead, you can bet on an enduring long-term trend through service providers like Banxa.
Banxa benefits when transactions rise, regardless of which underlying asset is popular. Meanwhile, the stock is trading at a discount. Keep an eye on this opportunity.