Crypto's move towards the mainstream got a significant boost amidst Russia’s war on Ukraine. At a time when physical money became scarce and its movement restricted, people in war-torn Ukraine, and their relatives and supporters worldwide, turned to digital currencies en masse to move money across national borders.

This is in addition to a strong tailwind created by the explosion of NFTs, decentralised finance (DeFi) and the metaverse, as well as the money from giant corporations, retail investors and financial institutions flooding the crypto market as a consequence. The crypto market is currently valued at a staggering US$2 trillion, as of April 04.

Yet, some investors remain wary of holding digital coins directly, given the highly volatile nature of these tokens. A safer way for these investors could be to buy stocks of companies that are plugged into various areas of the cryptocurrency market. While not a pure crypto play, each of these companies can provide meaningful exposure to the digital assets market without the extreme volatility that frequently roils the cryptosphere.

Leading US cryptocurrency exchange Coinbase (COIN) provides retail investors and institutions a safe and regulation-compliant exposure to cryptocurrencies. By precluding the need for an intermediary, Coinbase acts as a custodian for investors’ crypto holdings, thereby generating wider consumer engagement than a conventional financial exchange.

Coinbase reported strong fourth-quarter results, hitting new all-time highs in both revenue and trading volume “as high cryptocurrency prices and the continued adoption of cryptocurrency attracted new users to its platform,” says a Morningstar equity report, stressing that these results are highly correlated to cryptocurrency prices.

The crypto market is prone to wild price swings, which underscores Coinbase’s growth is often unreliable and may fluctuate from one quarter to another, it cautions.

The firm’s guidance for increased spending in 2022, and weaker cryptocurrency prices so far this year have prompted Morningstar equity analyst Michael Miller to lower the stock’s fair value from US$225 US$210.

“While Coinbase delivered impressive revenue growth during the quarter, expenses also grew rapidly as the firm increased investments and added another 950 employees during the quarter,” says Miller.

However, as the leading cryptocurrency exchange in the U.S., Coinbase has positioned itself as a reliable platform for new and experienced cryptocurrency traders alike. “The company’s reputation, regulatory compliance, and track record as a custodian have allowed it to maintain transaction fees above many of its peers despite operating in a crowded field with hundreds of competing firms trying to grab market share in the rapidly growing space,” Miller notes.

He points out, though, that the company still earns the majority of its income through the transaction fees crypto trading generates.

A global technology company, Block (SQ) operates a bank, consumer payments platform (Cash App), stock and cryptocurrency trading and physical debit cards. The San Francisco-based firm, formerly known as Square, also bought musician Jay-Z's music streaming service Tidal and forermly-ASX listed buy-now-pay-later provider Afterpay.

Block has operations in Canada, Japan, Australia, and the UK, and generates about 5% of revenue outside the U.S.

The fast-growing payments business is betting big on the top cryptocurrency, Bitcoin. The company purchased US$50 million worth of Bitcoin in 2020 and another US$170 million in 2021. More recently, the company, co-founded by former Twitter CEO Jack Dorsey, said it was building an open bitcoin mining system, as it seeks to diversify away from its payment business.

On the merchant side, Block’s business model boasts efficient client onboarding, innovative point-of-sale devices, flat fees, and an internally developed and integrated set of software solutions. These features allow the company to reach and retain micro-merchants that are unviable for other acquirers.

“We believe Square's success has largely come from expanding the acquiring market, as opposed to stealing material share from existing players,” highlights a Morningstar equity report.

The company's Cash App business is operating in an intensely competitive space, against rivals that have large customer bases. That said, “Cash App's performance compared with peers has been relatively strong, suggesting it is positioning itself to be a long-time leader in the space,” assures Morningstar equity analyst Brett Horn, who recently upped the stock’s fair value from US$115 to US$124.

CME Group (CME) operates exchanges giving investors, suppliers, and businesses the ability to trade futures and derivatives based on interest rates, equity indexes, foreign currencies, energy, metals, and commodities. The company also has a 27% stake in S&P/Dow Jones Indices, making the Chicago Mercantile Exchange the exclusive venue to trade and clear S&P futures contracts.

The exchange ranks second on the list of the biggest bitcoin futures trading platforms, behind Binance, accounting for nearly 14% of all open interest, valued at US$2.68 billion, as of April 04.

Low short-term interest rates have been the biggest encumbrance for the company’s interest rate complex in recent years. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME’s trading volume. However, with interest rates now ticking higher, “this drag has been removed and we expect the company to enjoy a recovery in trading volume at its interest rate futures complex,” says a Morningstar equity report, which forecasts “CME is well positioned for 2022 with market conditions becoming more favorable.”

CME has also benefited from increased retail interest in equity markets, which generated heavy trading volume for its equity index futures business.

While revenue from CME’s equity derivatives could soften as retail interest in equity markets fades, a conspiracy of factors -- the rise of $0 commissions, changes in investor behaviour, and the availability of futures on retail brokerage platforms -- will provide “a permanent tailwind to CME’s equity business,” says Miller, who puts the stock’s fair value at US$210.