DeFi stocks refer to the shares of companies that deal with the creation and provision of financial services through the use of decentralized systems. These platforms provide services of loans, credits, and trades with the help of which the buyer can directly buy from the seller without using any middleman like banks. Investing in DeFi stocks exposes the investor to the DeFi sector, which is changing the financial markets through decentralization, low fees, and increased security.
Cross-chain platforms are also one of the key trends in DeFi for 2024. These platforms are intended to enable the smooth transfer of assets across different blockchains and increase the level of liquidity and the pool of assets and protocols available. This trend is anticipated to solve some of the present scaling and compatibility problems of DeFi applications.
So for investors to fully take advantage of this trend and more, here are seven DeFi stocks that are disrupting the legacy banking sector and could also make early investors rich.
Coinbase (COIN)
Coinbase (NASDAQ:COIN) operates one of the largest cryptocurrency exchanges, popularizing assets such as Bitcoin (BTC-USD).
Therefore, Coinbase is the leader in shaping change in the conventional banking and finance sectors through its innovation in the cryptocurrency market. As the largest cryptocurrency exchange in the U.S., Coinbase serves as a platform and tool that facilitates the integration of cryptocurrencies into society.
In the future, I estimate Coinbase to maintain revenue growth in the high teens due to the enlargement of the total cryptocurrency market. Revenues are estimated to grow 98.8% in 2024. This is clearly a function of the powerful secular growth trends that are driving the company’s performance.
Analysts also take a bullish view of COIN stock, which has a consensus rating of “buy” with a slight upside at the time of writing. As Bitcoin continues its volatile trading pattern, this should earn COIN substantial trading fees throughout the year.
Riot Platforms (RIOT)
Riot Platforms (NASDAQ:RIOT) focuses on cryptocurrency mining, which is essential for DeFi.
With the industry witnessing a consolidation trend in the competitive Bitcoin mining industry, I think Riot Platforms is in the right place to at least capture some of this trend. This is evidenced by the company’s recent attempt to acquire a smaller rival, Bitfarms (NASDAQ:BITF), to increase the capacity of its mining operations and leverage on integration efficiencies.
Also, Riot has a solid financial position, holding more than $1 billion in cash and Bitcoin, which makes it ready to face the difficulties in the post-halving period that affect the entire industry. As the company keeps expanding its hash rate at a very fast pace, Riot has all the chances to become one of the leaders in the Bitcoin mining sector in the future.
RIOT is then one of those DeFis stocks that are disrupting banking by providing a much-needed hash rate to allow proof-of-work cryptocurrencies to thrive. Even if its mining operations don’t pan out, companies like these could pivot to the AI data center route instead.
Canaan (CAN)
Canaan (NASDAQ:CAN) specializes in high-performance computing solutions. It has a notable presence as one of those DeFi stocks as it produces Bitcoin mining hardware.
I am quite optimistic about Canaan’s prospects in 2024, given that the company seems well placed to leverage several industry drivers. Canaan is among the three biggest manufacturers of Bitcoin mining machines in the world and is expected to witness heightened demand for its products, given the Bitcoin halving event that took place in April this year.
A new partnership with Cipher Mining (NASDAQ:CIFR) and the launch of a new Avalon A14 series of miners that are more efficient than the previous ones show that Canaan is well equipped to meet this post-halving demand.
What I like the most about CAN stock is that it has great upside potential despite being one of the world’s top manufacturers of mining rigs. It has a market cap of just $300 million and trades at just 2x forward earnings, which makes it one of those potentially undervalued DeFi stocks for investors to consider.
Marathon Digital (MARA)
Marathon Digital, (NASDAQ:MARA) is a good investment opportunity in the Bitcoin mining sector.
Among competitors, Marathon demonstrated the lowest decay rate of monthly Bitcoin output post-halving. This is complemented by Marathon’s own technologies, such as the two-phase immersion cooling, which increases the hash rate of the mining rigs.
Also, Marathon’s exploration into mining Kaspa (KAS-USD), which is a high-margin cryptocurrency, can open up another stream of revenue and boost the company’s finances. The company has a large Bitcoin holding on its balance sheet which will considerably boost its book value per share if the coin tracks higher.
I expect that MARA’s holding of BTC to be a significant argument that analysts will use to demonstrate that it’s undervalued. Although the price-to-book ratio is typically used to analyze stocks such as banks, MARA’s holdings will provide additional opportunities to use these funds to diversify into additional streams of earnings and revenues. All in all, it’s one of those DeFi stocks to buy.
SoFi Technologies (SOFI)
SoFi (NASDAQ:SOFI) is a financial technology company.
Unlike most conventional banks that largely depend on lending and interest income streams, SoFi developed a diversified stream of income from providing various financial products and services as well as technology. This entails other institutional relationships, the Galileo platform it uses, and the banking services it has developed.
Hence, I think SoFi is a good investment at the present price. The firm has been able to break even and record GAAP earnings in Q4 2023 and Q1 2024. This big achievement shows the effectiveness of SoFi’s plan to expand its revenue streams and move away from solely the student loan business.
What I like the most about SOFI is that analysts are very bullish on its future trajectory. Notably, the market is pricing in double-digit revenue and triple-digit earnings per share increases over the next two years, far above what a traditional bank can offer investors. This then makes it one of those DeFi stocks to consider.
Robinhood (HOOD)
Robinhood (NASDAQ:HOOD) is known for its commission-free trading platform and is one of the most popular trading apps in the U.S.
Cryptocurrencies like Bitcoin have been on a resurgence, and the broader indices like the S&P 500 have also been strong this quarter. Thus, I believe Robinhood is in a good position to capture the trend of the retail trader’s comeback and the growth in cryptocurrencies.
As one of those disruptive DeFi stocks, it allows investors to buy and sell assets without the use of personal brokers or advisers, which may be a major problem for traditional banks.
The company’s move to enter the U.K. market in March opens a new field for its development. Moreover, Robinhood’s cryptocurrency trading business grew by 232% year over year in the first quarter of this year, and such statistics show that the company has the potential to tap into this trend even further.
MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) is a business intelligence company, but that’s not the central part of my investment thesis.
MicroStrategy is a very interesting investment idea because the company has effectively pivoted into becoming a pure Bitcoin play. Over the last four years, MicroStrategy has been on a Bitcoin buying spree, and it now holds a Bitcoin treasury of more than 226,000 BTC, valued at slightly over $14 billion.
In addition, management’s recent decision to recommend a 10-for-1 stock split may also increase the stock’s liquidity and attractiveness to retail investors. Although it does not confer direct value, stocks that undergo splits tend to outperform in the years after, which may prove to be a valuable catalyst.
I think the future for companies like MSTR with high book value per share will come from when management decides to convert these holdings into fiat, allowing them to make strategic pivots into industries such as data centers.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in BTC-USD.