Ethereum Could Overtake Bitcoin, Messari Analyst Says
TipRanks
Sometimes, popular sentiment fuels a market boom, and nowhere is that more evident than in the legal marijuana industry. However, cannabis remains illegal in the US at the Federal level, rendering the various state-level legalization regimes a patchwork of disconnected policies. Still, there is hope that the current Congress may pursue a Federal legalization bill – but before that happens, investors are watching to see which state or states will enact full legalization next. And high on that list is New York. BTIG analyst Camilo Lyon has been following the marijuana legalization movement in New York, and sees positive developments down the road. “Currently, we are modeling adult use sales in NY to begin in 4Q22, however, given the pace and focus cannabis reform is being given by the state legislature, we could see our timeline for legal adult use sales advance to 1Q22. We estimate this would increase our NY market revenue assumption to $749M from $187M, an increase of $562M. More importantly, we estimate 2023 sales would grow to $3.8B in recreational sales, that is $2.8B greater than what our current timeline would suggest,” Lyon opined. To this end, Lyon has picked out two cannabis stocks that have already built a presence in New York State, and could surge over 60% in the year ahead. After running both tickers through TipRanks’ database, we found out that the rest of the Street is also on board, as each sports a “Strong Buy” consensus rating. Curaleaf (CURLF) We’ll start by going big, and looking at Curaleaf. This company’s $10.9 billion market cap and $670 million annual revenues make it the world’s largest cannabis company. Curaleaf has a wide reach, with headquarters in Massachusetts and operations in 23 states. These operations include 23 cultivation facilities, 30 processing facilities, 101 dispensaries, and over 1,800 wholesale dispensary accounts. Even though the US cannabis market is fragmented, Curaleaf showed steadily rising revenues and year-over-year gains in each quarter of 2020. Starting with $104 million in Q1, the company reached $240.4 million in top-line revenues by Q4, a 201% year-over-year (yoy) gain. This was driven by a 242% yoy gain in quarterly retail revenue, which reached $164.9 million, and a whopping 578% yoy gain in wholesale revenue, which came in at $64.4 million. New York State makes up a small part of Curaleaf’s total business. Per the state’s current regulation, Curaleaf has the maximum of 1 cultivation/processing facility in New York, along with 4 dispensary licenses, all operating for the medical cannabis market. Still, this gives Curaleaf an established footprint from which to expand should the state legalize for recreational use. In his coverage of this stock, BTIG’s Lyon writes, “We believe CURA’s diverse geographic footprint will be the key growth driver supporting annual sales growth of 87% for the next two years…. Importantly, we estimate CURA turned free cash flow positive last year and will continue to generate sufficient FCF over the next two years to fund investments in its broad 23 state footprint.” To this end, Lyon rates Curaleaf a Buy rating, and his price target, at C$35 (US$28) suggests an upside of 75% for the coming year. (To watch Lyon’s track record, click here) Wall Street seems to agree with Lyon’s bullish call on this stock, as shown by the unanimous Strong Buy consensus rating based on 9 Buy reviews. The stock is selling for US$15.99 and its US$22.26 average price target suggests it has room for 39% growth by year’s end. (See Curaleaf stock analysis on TipRanks) Green Thumb (GTBIF) Next up is Green Thumb, a Chicago-based medical and consumer marijuana company with a network of facilities across 12 US states. These facilities include 13 manufacturing operations and 97 retail locations. The company’s retail products include edibles, vapes, and pre-rolled cannabis cigarettes, as well as CBD wellness items for the home health market. Like Curaleaf above, Green Thumb has a footprint in New York, within that state’s regulatory limits. The activities include three dispensary licenses, but no cultivation facility. The company, however, has already experienced transitioning a medical-use-only operation to a recreational model in the state of Illinois, and so has an organizational template should New York make a similar legal change. Green Thumb has released Q4 numbers on Wednesday, delivering better than expected topline growth. Specifically, revenue grew 13% QoQ to $177.2 million, beating consensus estimate of $166.7 million. EBITDA was also better than expected, growing 23% to $65.4 million, compared to the Street’s estimates of $58.3 million. Camilo Lyon covers Green Thumb, and writes of the company and its New York prospects: “Local news reported in January that [Green Thumb] may be planning to build a distribution facility in Warwick, NY (~50 miles north of Manhattan). According to reports, the distribution facility would include three buildings, two at 100,000 square feet and one at 200,000 square feet at the Warwick Technology Park. This news is particularly important as we believe NY could legalize adult-use as early as this year, and [Green Thumb] investing in new distribution capacity ahead of legalization should give it an edge to meet what should be overwhelming demand by recreational customers.” To this end, the analyst puts a Buy rating on this stock, and his C$73 (US$58 price target suggests a 69% one-year upside potential. (To watch Lyon’s track record, click here) All in all, Green Thumb has 8 Buy reviews, adding up to unanimous Strong Buy consensus rating. The stock is selling for $34.49, and its $47 average price target implies a 36% 12-month upside from that level. (See Green Thumb stock analysis on TipRanks) To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Bitcoin Could Boom 430% but Ethereum May Still Steal its Thunder
Bitcoin believers may have new reason to rejoice following the stimulus checks, but Ethereum has use cases on its side.
U.S. President Joe Biden’s $1.9 trillion COVID Relief Bill has passed congress and stimulus checks are soon to be distributed. Early signs indicate recipients are ready to buy Bitcoin.
A survey by Mizuho Securities showed that out of 235 participants who expect to receive stimulus checks from the COVID Relief Bill, 10% are interested in investing in Bitcoin. It’s a small sample size, but according to the survey investing in Bitcoin was a more popular response than investing in traditional stocks.
If that kind of runaway popularity doesn’t move you in itself, consider that it could translate into $40 billion dollars running like a river directly from Biden’s $1.9 trillion stimulus package into Bitcoin.
In the same week, Bank of America strategists suggested to Bloomberg that the price of BTC can be moved 1% for just $93 million.
Bank of America strategists said in a note to Bloomberg on Wednesday: “Bitcoin is extremely sensitive to increased dollar demand. We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%, while the similar figure for gold would be closer to $2 billion or 20 times higher. In contrast, the same analysis for the 20-year-plus Treasuries shows that multibillion money flows do not have a significant impact on price, pointing to the much larger and stable nature of the U.S. Treasuries markets,”
If you take the survey and projections on face value, you could surmise Bitcoin prices will be moved by over 430% by the influx of $40,000,000 flowing in from invested U.S. COVID Relief money.
It seems reasonable to expect the 12 month Bitcoin bull run to continue, making it the crypto success story of 2021, right?
DeFi Could Steal Bitcoin’s Thunder
Before the Bitcoin bull run, DeFi was a strong competitor as the most dominant story in crypto. BTC’s new price heights have made the world’s most famous cryptocurrency again the center of attention. Bitcoin may always be the star of the cryptoworld and certainly has seen wide popularity and acceptance as a store of value, but Ethereum’s fortunes have generally kept pace with and possibly exceeded Bitcoin since the end of last year.
Since December 2020, Bitcoin has risen from over $28,000 to more than $58,000 (up roughly 207%). Ethereum has traveled from more than $746 to over $1800 (up roughly %240).
This week, Bank of America published a report titled “Bitcoin’s Dirty Little Secrets”. Excerpts from the report are unflattering to the world’s most famous cryptocurrency.
Some of the statements coming from the report include:
“The main argument for Bitcoin is not diversification, stable returns, or inflation protection, but sheer appreciation…”
“There is no good reason to own BTC unless you see prices going up…”
And they point out Bitcoin’s environmental impact is not desirable, stating: “we calculate that a $1bn dollar inflow into Bitcoin is equal to 1.2mn cars driven over the course of a year or 12.7mn barrels of oil.”
They go on to extol the virtues of Ethereum, stating in the report: “Bitcoin is the most talked about cryptocurrency but Ethereum [the blockchain] has more features, including being more flexible in its hosting of decentralized finance (DeFi) than the Bitcoin blockchain.”
“DeFi does, however, show the opportunity which (distributed ledger technology) offers to finance. We believe that one of the best differences against being disintermediated by DeFi would be mainstream finance grasping these opportunities.”
The Hopes and Fears of DeFi…
As a digital currency, Bitcoin is simply designed with a more limited range of use cases compared to Ethereum which has smart contract capabilities. Arguably, Ethereum is the needed sequel to Bitcoin’s success. But how will their performances compare in 2021?
“Bitcoin is the asset of choice for investors looking for a store of value investment characteristics in the cryptocurrency market. Success then is an ongoing price appreciation for this asset. And appreciate it will as long as investors continue to believe in the future of blockchain and cryptocurrencies. Ethereum, on the other hand, is not only a cryptocurrency. It is a network that supports smart contracts, Dapps (decentralized applications), and Defi (decentralized finance) projects. Investors that are looking to invest in up-and-coming tech should pay extra attention to this crypto asset. Over 41 Billion dollars is currently locked in DeFi projects on Ethereum blockchain compared with 4 Billion only 8 months ago. That’s what success continues to look like for Ethereum this year as well — ongoing expansion and innovation,” Tally Greenberg, Head of Business Development at Allnodes said.
Phase 0 of Ethereum 2.0 — known as “Serenity” — launched on December 1, 2020. The hope for this upgrade to the Ethereum network is meant to address the needs for speed, efficiency, and scalability.
“BTC is unlikely to be dethroned as the leading cryptocurrency, but the growth shown on the Ethereum blockchain is hard to bet against. They will naturally be compared ‘against’ one another although this makes little sense from a functional point of view since each is vying for separate and mutually beneficial use-cases. BTC’s ‘digital gold’ narrative is straightforward which is beneficial for attracting new users who may be intimidated by the apparently more complex and dynamically evolving ETH narrative,” Jason Peckham, Analyst at Invictus Capital said.
Ethereum 2.0 is moving from Proof of Stake to Proof of Work but is still essentially in test stages. It remains to be seen whether it will handle the need for speed to support the DeFi range of use cases.
“To me, Ethereum looks very attractive for long-term purchases, since it has a much greater technical potential for application than Bitcoin. The Ethereum blockchain programmability offers incredible growth opportunities. Bitcoin with its limited emission is rather a tool for saving and paying. Ethereum, in turn, is a tool for real usage of blockchain technology in third-party projects,” Dyanis Zabauski, CEO of Coinmatics said.
But nevermind the actual real-world uses — can Ethereum compete with Bitcoin’s price performance?
“I think it’s highly likely that ETH will beat BTC in terms of price performance in 2021… Ethereum has not fully realized the benefit from the growing popularity of DeFi services and NFTs. The exploding NFT market will directly benefit the value of ETH and I think that ETH has room to grow until its price encompasses the current excitement around NFTs,” Noam Levenson cryptocurrency writer and founder of Narrow Straight Writing.
Some experts point to lagging performance as a reason to keep an eye on Ethereum, as we may see much more movement in 2021.
“From a relative performance standpoint, ETH the second-biggest cryptocurrency is lagging Bitcoin up only 20% from it’s All-Time Highs vs Bitcoin 175%. In previous cycles, we have seen ETH catch up to BTC growth when BTC begins to correct because the profits taken from BTC are cycled into altcoins. Because ETH is one to two cycles back from BTC in its growth cycle it makes sense that return on the laggard would outperform the larger market cap of BTC from here,” Jake Wujastyk Chief Market Analyst at TrendSpider said.
Until Ethereum 2.0 is a known quantity, there will be doubts about its ability to meet the already tremendous need for bandwidth to support transactions.
“Ethereum might beat Bitcoin in terms of percentage gain this year. So far in 2021, ETH has increased by value by nearly 150%, while bitcoin has gone up around 90%. However, it is unlikely that ETH will take over in terms of market capitalization because bitcoin is the cryptocurrency with the most people behind it in terms of adoption and use. Many view bitcoin as digital gold and major corporations and institutional investors are adding it to their balance sheets. Ethereum is unscalable in its current iteration and acts more as a platform for decentralized applications than a store of value” Ben Weiss, president and COO of CoinFlip said.
The launch of an improved Ethereum network is a testament to the strength of the project — but also represents change. Change conveys risk — while Bitcoin is simple, immutable, and constantly rising in value.
“I am not yet convinced DeFi is as groundbreaking as its followers deem it to be. The idea of yield farming sounds a great deal like smart contract hot potato with investors jumping from project to project, hoping they aren’t the last ones to hold the bag,” Don Wyper, COO at DigitalMint said.
Institutional investors have been key to driving the value of Bitcoin over the past 12 months. Will those same traditional investing giants turn their attention to Ethereum?
“Eventually some institutional investors will acquire ETH in order to expand their crypto exposure, while others will trade the recently launched CME ETH futures (interest is still low with volumes 8% of the CME BTC Futures). Others will acquire ETH in order to utilize and experiment with some of the applications, particularly in DeFi. However, I don’t see much movement comparable to bitcoin in the near term,” Jason Lau, COO at OKCoin said.
Conclusion
As many respondents pointed out, comparisons between Ethereum and Bitcoin make sense from an investor point of view, but the comparisons don’t go much further than that.
“BTC and ETH are different: BTC is a currency token while the ETH is a utility token. If mainstream institutional investors get into ETH, it would mean that mainstream institutions validate not only the current value of ETH, but also the Ethereum ecosystem as a whole. We have not seen signs of mainstream institutions being involved in Ethereum’s applications. So, in order for institutional investors to get on board, it would take more time and market education throughout 2021 and beyond,” Haohan Xu, CEO of Apifiny said
It may take a shift in mainstream understanding — or even a mild learning curve — to get traditional investors who have tried the familiar Bitcoin to understand the power of DeFi, but it seems the mighty bull run market is raising all ships in the cryptoworld and institutional investors are already getting on board.
“Institutional investors are already getting on board with Ethereum. Just recently, Grayscale, the world’s largest Crypto asset manager, purchased more Ethereum than Bitcoin for a change. Chinese public firm Meitu also grabbed 15K of Ether not too long ago. Galaxy Digital’s ETH funds raised 32 Million in less than a month. The launch of Ethereum Futures on the CME, the launch of Canadian ETH ETFs, and we’re just scratching the surface here… I anticipate a further surge of institutional investments in Ethereum. This is just the beginning,” Greenberg said.
Cover image modified from photo by Mater Miliano from Pixabay
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Surfing The Crypto Waves - Ethereum: A Path After The Correction (Cryptocurrency:ETH-USD)
Javascript is Disabled
Your current browser configuration
is not compatible with this site.