3 Crypto Stocks That Scream Buys
There is now a whole group of stocks in the crypto industry that are not themselves cryptocurrencies, but help support the industry – whether through payment infrastructure, crypto wallets, asset managers, exchanges or other means.
This group of stocks has in the past had a strong correlation with the movement of cryptocurrencies like Bitcoin. For this reason, while cryptocurrencies have struggled in recent months, this group of stocks has also struggled. But for some, I don’t think the sale is justified. Here are three crypto stocks that I think scream buys.
1. Silvergate Capital
Silvergate Capital (IF -7.07%)a crypto bank with nearly $16 billion in assets, has built a proprietary real-time payment system called the Silvergate Exchange Network (SEN) that better facilitates crypto trading between major US cryptocurrency exchanges and institutional traders .
Since cryptocurrencies trade non-stop and the United States does not operate on a real-time payment system, the ability to clear and settle transactions instantly makes trading more efficient. Silvergate has a first-mover advantage in this space and has now onboarded over 1,500 customers to SEN.
I thought the bank’s first quarter results were particularly strong, given that even though crypto trading volume and SEN volume had a weak quarter, the bank still onboarded 122 customers. This shows that even when interest in crypto is down, there is still long-term interest in what SEN is offering.
In addition, customers who onboard SEN bring to Silvergate many deposits on which the bank pays no interest, on which it can earn money by deploying them in the form of bonds or loans. This is a huge advantage over other banks that pay interest on their deposits. It also makes Silvergate a tremendous beneficiary of rising interest rates, as the bank can deploy these zero-cost deposits earning very little return into higher-yielding assets.
At 29 times forward earnings, Silvergate’s valuation may seem expensive, especially in today’s market, but rising interest rates will significantly boost the bank’s earnings. Additionally, Silvergate is working on issuing a dollar-backed stablecoin for commerce and remittances, which would make it the first regulated bank to do so.
I don’t think investors take into account the magnitude of this initiative. There’s certainly no guarantee of success, but it could be a game-changer for the title.
2. Signature Bank
Signature Bank (SBNY) -3.69%)with $122 billion in assets, is much larger than Silvergate but is similar in that it also runs a real-time payment system, called Signet, to better facilitate crypto trading.
Although Signet started after SEN, it seems to be catching up with Silvergate and is similar in size. It added 160 new customers during the quarter and has a total of 1,202 on its network, according to Barrons.
Signature has $29.43 billion in customer deposits of digital assets, though it’s a bit unclear how much of that is specifically due to Signet. Signature also reported that it had doubled the number of major exchanges using the bank as their primary bank from four to eight during the quarter.
Signature also has a strong lending business into which it can deploy all of its excess deposits, including venture banking, fund banking, commercial lending, specialty finance, multi-family and specialty mortgages, and more. . The bank has generated impressive returns and is extremely efficient operationally. Like Silvergate, it will also benefit hugely from rate hikes and trades below 12 times forward earnings.
3. Bancorp Customers
Assets of $19 billion Bancorp Customers (CUBI -3.38%) is the newest player to develop an instant payment system to help digital asset clients trade cryptocurrencies, as well as a variety of clients pursuing other goals.
It’s easy to assume that Customers Bancorp is late to the party. But that’s really not the case, because as more and more traditional financial systems enter the world of crypto, it will take more than one or two platforms providing payment infrastructure. It’s a massive industry; many exchanges and customers will be on more than one of these bank payment networks.
The rollout of the Customers Bank Instant Token (CBIT) seems to be going well so far. The bank onboarded a total of 100 customers to begin creating the network effect and had $2.3 billion in deposits from those customers as of April 15.
Clients Bancorp also manages a number of other miscellaneous lending operations, including specialized small and medium-sized business digital lending, banking as a service, venture capital banking, consumer lending, mortgage banking and much more, giving it much broader capabilities than most. banks its size.
With Customers Bancorp stock currently trading around six times forward earnings and only 117% of its tangible book value, which is essentially a bank’s net worth, I consider it an absolute steal right now.