MicroStrategy Shares Offer Better Exposure to Crypto Than Coinbase: Berenberg

MicroStrategy (MSTR) represents an attractive alternative to Coinbase (COIN) for investors looking to gain exposure to the cryptocurrency sector, Germany investment bank Berenberg said in a report Monday.

Investors who are very bearish on Coinbase shares and are inclined to short the stock should look at pairing it with long MicroStrategy, the report said, noting that the correlation between the two stocks since Coinbase went public via a direct listing in April 2021 is 0.96.

The U.S. Securities and Exchange Commission (SEC) has characterized most crypto tokens as unregistered securities, rendering them, and the platforms that enable the trading of these digital assets, as vulnerable to further regulatory actions, the note said. The commission and other regulators have been clear in classifying bitcoin (BTC) as a commodity rather than a security, the note added.

“We believe MicroStrategy, which features a unique business model focused on the acquisition and holding of bitcoins, represents an attractive alternative to Coinbase in the current environment,” analysts Mark Palmer and Hassan Saleem wrote.

Microstrategy currently holds 140,000 BTC worth around $3.8 billion at current prices.

Berenberg says macro drivers of demand for bitcoin are bullish for MicroStrategy shares, and investor concerns over de-dollarization – or the weakening of the U.S. dollar’s dominance – have helped to put a more positive spotlight on bitcoin in recent months.

Recent comments from SEC Commissioner Gary Gensler regarding Coinbase leave little doubt as to his view of the company’s noncompliance with securities laws and management’s “defiant tone” regarding the scrutiny it has received will potentially serve as an accelerant of the filing of any enforcement action, the analysts wrote.

“Coinbase’s revenues at risk in the event of an enforcement action are disproportionately profitable relative to its total revenue,” the report added.

The bank has a hold rating on Coinbase shares with a price target of $55. MicroStrategy is buy-rated with a $340 price target.