Year to date, Bitcoin (BTC-USD) is up about 40%. And hopefully, this rally marks the end of an extended crypto winter for coins and related crypto stocks. Helping, there are reasons to get bullish on Bitcoin.  For one, there is a high probability of recession this year. Contractionary monetary policies are likely to end and the dollar might continue to weaken. This is good news for risky asset classes.  Plus, cryptocurrencies could see a big flow of funds after a massive correction. Furthermore, Bitcoin halving is due in 2024. In the past, the event has been associated with a meaningful rally in the cryptocurrency blue chips. The next 12-24 months are therefore likely to be positive for the crypto world.

Let’s talk about three crypto stocks that can potentially deliver multi-bagger returns.

RIOT Riot Platforms $6.13
COIN Coinbase $61.71
BITF Bitfarms $0.92

Crypto Stocks: Riot Platforms (RIOT)

An image of a miner with a pickaxe mining digital coins, computer code and various numbers are overlaid on the image

Source: Yev_1234 / Shutterstock

Riot Platforms (NASDAQ:RIOT) is up 82.2% year to date. The rally from deeply oversold levels is likely to sustain if Bitcoin continues to trend higher. It’s worth noting that Riot has continued to boost its mining capacity through the industry downturn. As of January, the company reported a hash rate capacity of 9.3EH/s. The company has plans to increase capacity to 12.5EH/s by the first half of the year. Riot is also attractive considering the balance sheet. As of Q3 2022, the company reported cash and equivalents of $255 million and zero debt. For the same period, Riot had 6,897 Bitcoin holdings. With strong financial flexibility, the company is positioned to accelerate growth if crypto recovery sustains.

I must add here that Riot reported a gross mining margin of 65.4% for the first nine months of 2022. Assuming a scenario where Bitcoin trades above $35,000, the company is positioned to deliver a healthy EBITDA margin.

Coinbase (COIN)

The Coinbase (COIN stock) logo on a smartphone screen with a BTC token. Crypto winter is setting in.

Source: Primakov / Shutterstock.com

After a challenging 2022, Coinbase (NASDAQ:COIN) skyrocketed by 90% year to date. If crypto trading activity gains traction in the coming quarters, COIN stock will remain in an uptrend. For 2022, Coinbase reported revenue of $3.1 billion. For the same period, the company’s adjusted EBITDA loss was $370 million. While total revenue declined significantly, Coinbase reported a 53% growth in subscription and services revenue to $792.6 million. Based on Q1 2023 guidance (annualized), Coinbase is positioned to report revenue in excess of $1.2 billion from this segment.

Coinbase Prime, for institutional investors, is another potential growth catalyst for market recovery. It’s also worth noting that Coinbase ended Q4 2022 with cash and equivalents of $5.5 billion. The company has navigated the crisis period with a strong balance sheet. This provides flexibility for platform development and potential international expansion in the coming years. Coinbase intends to launch “foundational products that are a gateway to Web3 and crypto in every country.”

Bitfarms (BITF)

Concept art of crypto mining with little figuring and a Bitcoin token.

Source: Shutterstock

Bitfarms (NASDAQ:BITF) is up about 120% year to date and is still attractive. It’s worth noting that Bitfarms mined 1,515 Bitcoin in Q3 2022. What’s more important is the fact that the company lowered production cost to $9,400 per Bitcoin. Even with depressed sentiments, the company was able to generate positive operating cash flows. Further, for Q3 2022, the company’s hash rate was 4.2EH/s, which increased by 180% on a year-on-year basis. The company guided to close 2022 with a hash rate of 6.0EH/s.

Therefore, with sustained growth in mining capacity, the outlook is bright for 2023. Considering the production cost, Bitfarms is positioned to report strong OCF in the coming quarters. Another big positive for Bitfarms is the deleveraging story. As compared to June 2022 levels, the company has reduced debt by 80% as of February. With $25 million in debt, the company has a strong balance sheet and is poised to sustain aggressive growth.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.