1 Strategic Shift That Could Redefine Crypto's Future. What You Need to Know About the BitGo IPO

Key Points

• The Circle IPO has opened the door for digital asset custodian BitGo to go public.

• New crypto market regulation, combined with wide-scale institutional adoption, makes BitGo attractive as a play on crypto growth.

• BitGo is a "pick-and-shovel" company, focusing on activities such as crypto custody that are important for institutional investors.

• 10 stocks we like better than Circle Internet Group ›

The crypto market has already had one splashy initial public offering (IPO) this summer, and now it may be getting another. Next up is a potential IPO from digital asset custodian BitGo, which recently filed with the Securities and Exchange Commission (SEC) for a public market launch.

While an IPO from BitGo may not generate as much buzz or hype as the IPO from stablecoin giant Circle Internet Group (NYSE: CRCL), it could have a more lasting impact on the future of crypto. Here's why.

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BitGo and institutional adoption of crypto

BitGo is a crypto custody company.That means it stores and protects digital assets, including (but not limited to) cryptocurrencies. BitGo makes it easy to transfer digital assets into and out of a portfolio.

For the individual investor, this might not seem like a big deal. After all, if you are holding your cryptocurrency assets on an exchange such as Coinbase Global (NASDAQ: COIN), it will do all the heavy lifting for you. And if you choose self-custody (which means that you hold the crypto yourself, in your own blockchain wallet), then you're obviously not in the market for a digital asset custodian like BitGo.

Image source: Getty Images.

But there are plenty of financial services firms, fintechs, and institutional investors that could avail themselves of BitGo's services. Crypto is now a multitrillion-dollar industry, and is growing rapidly. The new era of tokenization is fast approaching for the crypto industry, and this is an area where BitGo can also play a role. Tokenization creates blockchain-native digital assets that must be stored and protected, just like crypto.

From my perspective, BitGo is a "pick-and-shovel" company for the crypto industry. The traditional financial services industry is still very new to crypto, and it needs the services of a digital asset infrastructure company like BitGo. In fact, BitGo now offers "crypto-as-a-service" offerings to companies embracing crypto.

The investment thesis for BitGo

The macro investment thesis for BitGo is easy to understand. The crypto industry is a $4 trillion behemoth, and only getting bigger. New crypto regulation is now on the way, thanks to the Trump administration's pro-crypto policies. Companies left and right are embracing the crypto treasury company model, and they will likely need custody help with their their crypto. And, finally, institutional investors are boosting their portfolio allocations to crypto, while demanding new crypto-focused financial products to meet their investment needs.

If you're a skeptic, of course, this is really the investment thesis for any crypto company these days. And, indeed, some analysts have already pointed out that BitGo is just trying to take advantage of a possibly brief window of opportunity when the markets are jazzed about crypto. The Circle IPO showed that there is overwhelming demand from investors for any and all things crypto. Most likely, even investors who had never heard of stablecoins before this summer were champing at the bit to get in on Circle.

Keep in mind, too, that BitGo might not even be the highest-profile crypto company to go public this year. Both Grayscale and Gemini are also itching to go public, and both of these companies arguably have more name-brand recognition than BitGo. You might not have heard of the Gemini cryptocurrency exchange, but there's no way that you haven't heard of the company's co-founders, the Winklevoss twins.

A new era for crypto?

Right now, BitGo has about $100 billion in crypto assets under custody, up from $60 billion at the beginning of the year. And it just announced a major new expansion into Europe, thanks to the crypto market regulation that just went into effect there at the end of 2024.

Thus, it is possible to see a major strategic shift happening: the blurring of the line between traditional finance and blockchain finance. These two worlds are coming together in new ways, and no company better signifies this shift than BitGo. Think of the company as an asset manager for crypto. The future of crypto is all about regulated, scalable crypto services for institutional investors.

So keep your eyes open for what happens next with BitGo. When the company filed with the SEC, it did not announce how many shares it planned to offer, or any pricing details. That, obviously, will depend on how much demand there is for the IPO. That said, if you're looking to diversify your crypto portfolio, one way to do that is by adding a pick-and-shovel company like BitGo to the mix.

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Dominic Basulto has positions in Circle Internet Group. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.