Bitcoin Stock Investment: A Guide To Getting Started

Investing in stocks with Bitcoin has become an increasingly popular option as cryptocurrencies gain mainstream adoption. While it is possible to purchase cryptocurrencies like Bitcoin directly, investing in stocks with crypto can be a safer way to gain exposure to the crypto market. This is because crypto stocks are typically tied to established companies that have diversified business models and large cryptocurrency holdings on their balance sheets. These companies include crypto exchanges, crypto miners, blockchain technology specialists, and businesses that have made significant investments in crypto. Investing in crypto stocks allows individuals to invest in the growth of the crypto market without taking on the same level of risk as direct crypto investments.

Crypto exchanges and trading platforms

Coinbase

Coinbase is one of the most popular and well-established cryptocurrency exchanges. It allows users to invest directly with USD and offers a wide selection of coins and tokens to invest in, including Bitcoin, Ethereum, and Litecoin. Coinbase provides a high level of security and trustworthiness, making it a reliable platform for crypto trading. However, it is important to note that Coinbase charges relatively high fees unless users opt for Coinbase Pro. Additionally, users do not have control over the private keys in their wallets.

Uphold

Uphold is a crypto exchange that offers a simple solution for trading multiple assets. It allows users to trade various assets directly from a single account, eliminating the need to constantly convert between different pairs of coins and tokens. Uphold supports a wide range of crypto tokens, including popular ones like XRP, and even offers trading for some stocks. It provides both desktop and mobile apps for user convenience. However, Uphold has been reported to have a less user-friendly interface compared to some other platforms.

Kraken

Kraken is one of the oldest crypto trading platforms and offers a good selection of coins and tokens. It also allows margin trading, catering to more advanced traders. Kraken is a true crypto exchange, and as a result, it may be less intuitive for beginners to use. It is important to note that Kraken offers a more limited selection of coins and tokens to US customers compared to international customers.

Gemini

Gemini is another popular platform for investing in crypto, known for its user-friendly app-based interface. As one of the largest exchanges by assets, Gemini supports most major cryptocurrencies and offers competitive interest rates on assets. Additionally, Gemini provides a referral program where both the referrer and the referred friend can earn $15 in BTC or another crypto of their choice when certain conditions are met. However, Gemini has been reported to have limited payment and deposit methods, and its customer service can be inconsistent.

Bitstamp

Bitstamp is a well-established cryptocurrency exchange that has been operating since 2011. It offers over 70 tokens for trading and provides a volume-based fee structure. Bitstamp allows users to buy crypto instantly with their credit or debit cards and has a solid mobile app for on-the-go trading. However, Bitstamp's staking features are not available to all users, and there are limited assets eligible for earning staking rewards.

EToro

EToro is a worldwide platform for trading crypto, offering options for both international and US-based users. It provides a practice trading account, allowing users to familiarize themselves with the platform before committing real funds. eToro offers a $10 bonus for US users who deposit and trade $100 in crypto assets. However, it is important to note that eToro has limited options in the United States and is only available in 41 states. The platform also does not support as many tokens and coins as some other competitors.

Crypto.com

Crypto.com is a rapidly growing crypto exchange based in Hong Kong, providing extensive support for US-based customers. It offers access to a wide range of tokens and coins, with over 90 tokens available worldwide and 50 tokens for US users. Crypto.com also provides solid interest rates on its crypto savings accounts. One drawback is that Crypto.com is currently only available as a mobile app, with no desktop platform option.

Binance

Binance is a well-known crypto exchange that offers a robust trading platform and a decent mobile app. It supports a vast number of coins and tokens, providing users with a diverse range of investment options. However, Binance.us, the US version of the platform, has limited coins and tokens compared to the international version. Additionally, Binance is not available in all 50 states and has been reported to have limited customer support.

Final Thoughts

When choosing a crypto exchange or trading platform, it is important to consider factors such as the number of tokens and coins available, fees, ease of use, security, customer service, and additional features. Each platform has its own strengths and weaknesses, so it is essential to evaluate your priorities and preferences before making a decision. Remember to always do your own research and invest wisely.

Crypto wallets

There are two main types of crypto wallets: hot wallets and cold wallets. Hot wallets are always connected to the internet and can be accessed from mobile or desktop devices. They are more convenient but also face a greater risk of cyberattacks. Examples of hot wallets include Coinbase Wallet, MetaMask, and Trust Wallet. On the other hand, cold wallets are kept offline and can be in the form of hardware wallets or paper wallets. They are more secure but harder to access and are susceptible to loss or destruction. Examples of cold wallets include KeepKey, Ledger Nano S Plus, and SafePal.

When choosing a crypto wallet, it is important to consider factors such as security, functionality, and cost. Security features such as two-factor authentication and multi-signature support are crucial for protecting your private keys. In terms of functionality, look for wallets that support a large number of cryptocurrencies and offer features like hardware wallet compatibility and customizable transaction fees. Cost-wise, hot wallets are usually free but may charge higher transaction fees, while cold hardware wallets require an upfront payment to purchase the wallet.

Crypto stocks vs. pure-play Bitcoin mining stocks

Crypto stocks and pure-play Bitcoin mining stocks are two ways to gain exposure to the cryptocurrency market. Crypto stocks are publicly traded companies that have businesses highly exposed to the cryptocurrency market or blockchain technology. Pure-play Bitcoin mining stocks, on the other hand, are companies solely focused on mining Bitcoin. Here is a comparison between the two:

Crypto Stocks

Crypto stocks include popular crypto exchanges, blockchain technology specialists, and companies with large cryptocurrency holdings on their balance sheets. These stocks are highly correlated to cryptocurrency price fluctuations, making them extremely volatile and unpredictable. However, they offer investors a way to gain exposure to the cryptocurrency market without directly purchasing cryptocurrencies. Examples of crypto stocks include:

• Coinbase Global (COIN): A top cryptocurrency exchange that offers a platform for buying and selling various cryptocurrencies.
• Block and PayPal Holdings: Companies that enable users to purchase and hold cryptocurrencies within a digital wallet.
• Canaan and Hut 8 Mining: Companies involved in the design and use of specialised machines for Bitcoin mining.
• Meta Platforms and Shopify: Companies exploring the use of cryptocurrency in their business models.
• Robinhood Markets: A discount brokerage app that allows users to buy and sell cryptocurrencies, among other assets, commission-free.
• CME Group: Operates an exchange that trades derivatives, including futures and options, on various assets, including Bitcoin and Ethereum.

Pure-Play Bitcoin Mining Stocks

Pure-play Bitcoin mining stocks are companies that focus solely on mining Bitcoin. These companies invest in specialised hardware and infrastructure to process Bitcoin transactions and secure the network. Some examples of pure-play Bitcoin mining stocks include:

• Marathon Digital (MARA): One of the largest and most valuable pure-play Bitcoin mining companies, with a fleet of over 105,000 miners.
• Riot Platforms (RIOT): A Bitcoin mining company aiming to be one of the largest and lowest-cost producers of Bitcoin in North America.
• Hut 8 Mining (HUT): A company with a diversified business model and multiple revenue streams related to Bitcoin mining.
• CleanSpark (CLSK): A Bitcoin mining company that reported impressive revenue and profit growth in its latest quarter.

Key Differences

The main difference between crypto stocks and pure-play Bitcoin mining stocks lies in their business focus and level of diversification. Crypto stocks offer more diversification as they often have other business operations outside the crypto sector. On the other hand, pure-play Bitcoin mining stocks are solely focused on mining Bitcoin, making them more specialised but also more vulnerable to crypto market volatility.

In terms of returns, pure-play Bitcoin mining stocks can offer higher potential gains during bull markets. For example, Riot Platforms, a top Bitcoin miner, is up 172% year-to-date. However, crypto stocks may provide more stable returns over the long term due to their diversified nature.

Crypto as a high-risk investment

Cryptocurrency is a digital currency that has become increasingly popular in recent years, with many people viewing it as an innovative investment opportunity. However, it is important to remember that crypto is a high-risk investment. Here are some key points to consider:

Volatility and Unpredictability

Crypto prices can be extremely volatile and unpredictable, often moving suddenly with no warning. This is due to various factors, including high-profile social media posts, company or government announcements, and influencer promotions. The price of crypto is primarily driven by demand, and a single post from an influencer can significantly impact its value. As a result, investors must be prepared for substantial market swings and the potential for significant losses.

Regulatory and Protection Concerns

Most crypto-related activities are currently unregulated, and there are limited rules to protect investors once their money is in the crypto ecosystem. While crypto businesses in certain countries, such as the UK, must register and follow anti-money laundering and marketing rules, investors should be cautious of companies that do not provide prominent warnings about the risk of losing money. In the event of issues or failures, investors are unlikely to have access to financial protection or compensation schemes available for other types of investments.

Cyber-Attack and Fraud Risks

While the encryption that secures cryptocurrencies is advanced, crypto exchanges and investors are still vulnerable to cyber-attacks and fraud. Hackers have successfully targeted crypto exchanges, and despite recovery efforts, many investors have suffered significant losses. Additionally, crypto scammers and "finfluencers" use social media to promote crypto investments, and investors must be wary of such promotions and conduct thorough research before investing.

Diversification and Risk Management

Given the high risks associated with crypto investments, it is crucial to practice effective risk management. Investors should only allocate a small portion of their portfolio to crypto and ensure that it is part of a diversified portfolio. It is not advisable to invest more money than you can afford to lose. Index funds, for example, can offer lower-risk alternatives to cryptocurrencies and are less susceptible to the extreme volatility of the crypto market.

In conclusion, while cryptocurrency may offer attractive investment opportunities, it is a high-risk venture. Investors should thoroughly understand the risks, practice caution, and ensure that crypto investments align with their risk tolerance and broader investment strategies.

Crypto savings accounts

LEDN

LEDN is a crypto lending and savings platform that allows Bitcoin holders to earn some of the safest yields available. It adjusts its yields every month to keep up with market conditions. For example, the platform offered 6% APY on Bitcoin during the 2020/2021 bull market, but has since reduced that yield to 1.5% APY. USDC yields, on the other hand, have remained high at 9.5% APY as of April 2023.

YouHodler

YouHodler is a crypto exchange and high-interest crypto savings account in one. It offers some of the highest rates in the market, including up to 7% APY on Bitcoin savings, paid out weekly. The platform has a minimum deposit amount of $100 and also provides crypto loans to customers.

NEXO

NEXO is a high-interest crypto savings platform with minimal lockup periods of under 24 hours and third-party guarantees for its crypto assets. It offers up to 7% interest on Bitcoin savings and up to 12% interest on USDC savings.

Uphold

Uphold is a crypto exchange, forex trading, and crypto savings service in one app. It doesn't generate yield through lending but by staking users' crypto inside their relevant blockchains to earn token rewards. This is generally a less risky method of generating returns, but the number of cryptos that support this is limited.

KuCoin

KuCoin is one of the most popular cryptocurrency exchanges and has a great savings product called KuCoin Earn. You can earn crypto with high APY by saving, staking, or taking advantage of promotional offers. Right now, you can earn 0.60% APY on USDC and 0.03% on BTC.

Coinbase

Coinbase is best known as a digital wallet, but it also serves as a digital crypto savings account for some customers. Eligible US-based customers can earn up to 5.20% APY on US Dollar Coins (USDC). Coinbase doesn't lend out its USDC. Instead, this is a way to earn a small amount of interest while you wait to make trades on cryptocurrency.

Crypto.com

Crypto.com advertises some of the highest interest rates on the market, but the terms to get these rates are very specific. Investors with smaller amounts of cryptocurrency may find better yields elsewhere. The platform pays interest on 15 traditional cryptocurrencies and 8 stablecoins, with yields based on simple daily interest.

BlockFi

BlockFi offers interest rates ranging from less than 0.5% to over 7.5% annually. It also boasts impressive security features, with cold storage custodian services from Gemini and backing from names like Valar Ventures and Morgan Creek Capital Management. Unfortunately, BlockFi has ceased offering its interest-bearing accounts to US citizens due to regulatory concerns.

OnJuno

OnJuno allows you to earn 6% interest on all your crypto deposits and get 5% back on crypto spends. It also allows you to buy crypto for zero fees. Basic users can earn up to a 1.2% yearly savings bonus on balances up to $5,000, while Metal users earn a 2.15% yearly savings bonus on balances up to $100,000.

Frequently asked questions