Why I'm Turning to 2 Ethereum Treasury Plays After Fed Pivot
The cryptocurrency offers a promising future with two companies focusing on it as a reserve asset.
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Stocks are volatile on Thursday morning as they digest the Federal Reserve’s quarter-point interest rate cut. Unless something very surprising happens, there will be two more cuts coming this year.
It is very difficult to spin this dovish monetary policy as a negative for stocks. The only real argument is that lower rates are already priced into the market and valuations are unsustainable. Market participants aren’t buying that argument.
Even if you are bullish, the challenge of this market is putting more money to work. Just because stocks are trending higher, that doesn’t mean that they are offering attractive entry points. Traders can do well buying extended stocks that become more extended, but it carries higher levels of risk.
One interesting development is that bonds TLT are weak. Interest rates are higher, which is probably a sell-the-news reaction to the expected rate cut. Equities are still attracting very strong flows and are unconcerned about the fluctuations in bonds.
I’m looking for some new places to put some cash. I am pretty heavily long and am happy to add to most of my positions as they develop, but I’m looking for some new ideas that could have better upside in the short term.
One group that caught my eye is Ethereum-related names. Ethereum is a cryptocurrency, but unlike Bitcoin, it is used mainly as a programmable blockchain rather than a digital currency. The value lies in the utility of the blockchain.
Blockchains are decentralized, distributed digital ledgers that record transactions across many computers in a secure, transparent and tamper-resistant way. They can be used to track transactions in finance, healthcare, supply chains, NFTs and for Bitcoin. A number of experts in the cryptocurrency universe believe that Ethereum has greater potential value than Bitcoin because of its utility.
There are two key stocks tied to Ethereum: BitMine Immersion Technologies (BMNR) and SharpLine Gaming (SBET). Both are using a "treasury strategy" much as Strategy MSTR is doing with Bitcoin. The companies are holding Ethereum as their main asset while operating various other business enterprises.
The charts of both BMNR and SBET are similar and are turning up after drifting in a trading range since early August. I’m putting some of each on my radar and will be watching them more carefully as they develop. I will keep you updated.
I continue to look for more buying opportunities, but I am staying patient and waiting for better entry points to develop.
At the time of publication, DePorre was long BMNR and SBET.
