Cryptocurrency Stock: Worth Investing Or Risky Business?

Cryptocurrency is a digital currency, such as Bitcoin, that is used as an alternative payment method or speculative investment. It is powered by blockchain technology, which maintains a tamper-resistant record of transactions and keeps track of who owns what. Cryptocurrency investing can take many forms, from buying cryptocurrency directly to investing in crypto funds and companies. The most common way to buy cryptocurrency is through a crypto exchange, such as Coinbase or Binance. However, some brokerage firms, such as Robinhood and SoFi, also allow users to buy crypto. It is important to note that investing in cryptocurrency is risky due to its volatile nature and regulatory uncertainty.

Buy stock in cryptocurrency companies

Cryptocurrencies are not traded on Wall Street in the same way stocks are. However, several publicly traded companies are deeply tied to the world of cryptocurrency or other digital assets. These are known as crypto stocks.

Crypto stocks are shares in companies that operate crypto exchanges, invest in cryptocurrencies themselves, or create computer equipment used for crypto mining.

• Coinbase Global Inc.: Coinbase (ticker: COIN) runs one of the largest crypto exchanges in the U.S.
• MicroStrategy Inc.: MicroStrategy (ticker: MSTR) is an analytics software company that has built up a vast reserve of Bitcoin.
• NVIDIA: NVIDIA (ticker: NVDA) made its name as a producer of graphics cards used for computer gaming, but has expanded the use of its technologies into cryptocurrency mining.
• Marathon Digital Holdings Inc.: Marathon (ticker: MARA) is a company heavily involved in Bitcoin, giving investors a way to gain exposure to that asset without buying it directly.
• Block: Block (ticker: SQ), formerly known as Square, is a financial services and payment processing company with several lines of business related to blockchain technology and Bitcoin.
• Riot Platforms Inc.: Riot Blockchain (ticker: RIOT) is a company focused on Bitcoin mining, with the largest such operation in North America.
• Advanced Micro Devices Inc.: Advanced Micro Devices (ticker: AMD) makes computing equipment, including GPUs, which are often used in cryptocurrency mining.
• PayPal Holdings Inc.: PayPal (ticker: PYPL) is a well-known technology company that has long been focused on digital payments and has added crypto payment and investing tools to its PayPal and Venmo apps.
• CME Group Inc.: CME (ticker: CME) is a financial services company whose businesses include clearinghouse services and derivatives exchanges, including for cryptocurrencies.

It's important to note that investing in individual stocks carries more risk than investing in a fund, and crypto stocks may be vulnerable to potential downturns in the volatile cryptocurrency markets.

Buy stock in companies that hold a lot of crypto

If you want to invest in cryptocurrency without actually owning any, you can buy stock in companies that hold a lot of crypto. These companies offer indirect exposure to crypto by holding substantial portfolios of cryptocurrency on their corporate balance sheets. Share prices of such companies are more likely to correlate with cryptocurrency prices than those of companies that don't hold any crypto.

• Block (SQ)
• MicroStrategy (MSTR)
• Tesla (TSLA)
• MassMutual (MCI)

It is important to note that crypto markets have been volatile, and the more a company's fortunes are tied to crypto, the more volatile it is likely to be. Therefore, before investing in any company, it is essential to thoroughly research and understand the risks involved.

Invest in companies using blockchain tech to innovate

Blockchain technology is a digital public ledger that records transaction information. Each "block" of information is digitally verified, given a unique hash (or identity), and added to the public ledger. The use of blockchain addresses a problem faced by previous efforts to create purely digital currencies: preventing people from making copies of their holdings and attempting to spend them twice.

Blockchain technology is not limited to the world of digital currencies. It has the potential to be used in almost every industry, including healthcare, real estate, and lending. For example, Walmart has been testing the use of blockchain to track the distribution of food from its suppliers, making it easier to isolate outbreaks of foodborne illness. Blockchain can also be used to enhance financial services, such as lending, money transfers, and banking.

• IBM: A legacy technology company that offers blockchain-based solutions to businesses.
• NVIDIA: In addition to manufacturing crypto mining hardware, NVIDIA has developed a blockchain-based platform for the gaming industry.
• Amazon: Provides blockchain solutions for business clients using Amazon Web Services.
• Alibaba: Provides "blockchain as a service" infrastructure to support product traceability, supply chain finance, data asset sharing, and digital content ownership.
• JPMorgan Chase: A legacy financial institution that was an early adopter of blockchain technology and has already used it to execute cross-border trades.

By investing in companies that are using blockchain technology to innovate, you can gain exposure to the cryptocurrency space without directly purchasing any digital assets. However, it's important to note that the more a company's fortunes are tied to crypto, the more volatile the investment is likely to be.

Buy shares in publicly traded cryptocurrency funds

Cryptocurrency stocks are shares in publicly traded funds or companies that have significant exposure to cryptocurrency or another application of blockchain technology. Crypto funds come in the form of exchange-traded funds (ETFs) and mutual funds.

ETFs are passively managed funds that hold baskets of stocks or other liquid assets, usually organised around a theme or sector. A crypto ETF may own cryptocurrency directly, like the Fidelity Advantage Bitcoin ETF (FBTC) or the Invesco Galaxy Bitcoin ETF (BTCO), or be a portfolio of publicly traded cryptocurrency stocks, such as the Schwab Crypto Thematic ETF (STCE).

Mutual funds are professionally managed funds that are typically organised around a specific strategy or theme. A crypto mutual fund, like a crypto ETF, may hold cryptocurrency directly, invest in cryptocurrency futures contracts, or invest in publicly traded crypto stocks. Fidelity's Bitcoin Strategy ProFund Investor Class fund (BTCFX) is an example of a mutual fund that invests in Bitcoin futures.

When investing in crypto funds, investors should only invest in funds that are sponsored by credible institutions with proven track records to mitigate the risk of fraud.

Invest in a cryptocurrency Roth IRA

Investing in cryptocurrency is risky and volatile, but it has produced top returns for investors over time. Cryptocurrencies are digital currencies that can be used to buy goods and services or traded for a profit. They are powered by blockchain technology, which maintains a record of transactions and keeps track of who owns what.

If you're looking to invest in cryptocurrency, you'll need to open an account with a cryptocurrency exchange. Most stockbrokers don't support trading in cryptocurrency. Coinbase is one of the most popular and beginner-friendly exchanges in the US. Other options include Gemini, Robinhood, and SoFi.

When investing in cryptocurrency, it's important to do your research. Understand that picking a good cryptocurrency is not like picking a good stock. A stock represents ownership in a company, while owning a cryptocurrency represents ownership of a digital asset with zero intrinsic value.

Another option for investing in cryptocurrency is through a Roth IRA. A Roth IRA is a retirement account that allows you to add after-tax dollars and make investments with those contributions. You are not taxed on any investment gains your investments might have. If you take withdrawals before retirement age, you'll be penalized.

According to the Internal Revenue Service (IRS), you cannot contribute cryptocurrency directly into your Roth IRA. However, you can add it to your IRA via purchase. Few traditional providers of IRAs will allow you to do this, but there are niche platforms that offer this option.

Investing in cryptocurrency through a Roth IRA has tax benefits, but it's important to consider the risks. Cryptocurrency is highly volatile, and there are fees associated with buying and selling. If you're approaching retirement and cannot afford to ride out a downturn, investing in cryptocurrency through a Roth IRA may not be suitable.

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