The Best Bitcoin Investment: Company Guide

Bitcoin is back over $60,000 and, as of June 2024, the crypto market cap has exceeded $2 trillion for the first time since 2022. While investing in crypto is still considered a risky, speculative investment, there are companies that offer crypto market exposure without having to buy crypto directly.

- Coinbase Global Inc. (COIN)

- NVIDIA Corporation (NVDA)

- Advanced Micro Devices Inc. (AMD)

- PayPal Holdings, Inc. (PYPL)

- Marathon Digital Holdings Inc. (MARA)

- Riot Blockchain Inc. (RIOT)

- MicroStrategy Inc. (MSTR)

- CME Group Inc. (CME)

- iShares Bitcoin Trust (IBIT)

- Block (SQ)

- Robinhood Markets (HOOD)

Bitcoin mining companies

Marathon Digital Holdings (MARA)

Marathon Digital is one of the largest and most valuable pure-play Bitcoin mining stocks. The company operates a fleet of more than 105,000 Bitcoin miners and held a total of 11,466 Bitcoins, worth about $326 million, in the first quarter of 2023. Marathon Digital also provides general services to the crypto industry, including transaction and custody verification, as well as blockchain security work. The company has a strong focus on sustainability, investing in renewable energy sources such as wind power.

Bitfarms Ltd.

Bitfarms is a global vertically integrated Bitcoin mining operation with farms powered by hydroelectricity on 12 sites across two continents. The company has over six years of experience in the industry and offers onsite technical repair, proprietary data analytics, and Company-owned electrical engineering and installation services. Bitfarms also operates Bitcoin blockchain computing centres around the world with in-house management and on-site repair and maintenance.

HIVE Blockchain Technologies (HIVE)

HIVE, previously known as Hive Blockchain and Leeta Gold Corp, is a cryptocurrency mining company with operations in Canada, Sweden, and Iceland. The company has a market value of around $500 million and offers cloud computing services, data centre operations, and other infrastructure solutions.

CleanSpark

CleanSpark develops infrastructure for Bitcoin and supports blockchain technologies with sustainable energy. The company invests in communities that source low-carbon energy, such as wind, solar, nuclear, and hydro. By purchasing renewable energy credits and connecting to low-carbon power on the grid, CleanSpark aims to incentivize investment in renewable and distributed energy.

Other Notable Mentions

Other notable Bitcoin mining companies include Bitdeer Technologies Group, GRIID Infrastructure, Stronghold Digital Mining, Gryphon Digital Mining, and Greenidge Generation Holdings.

It is important to note that investing in Bitcoin mining companies comes with risks, and it may not be suitable for all investors. Conduct thorough research and due diligence before making any investment decisions.

Crypto stocks vs crypto

Before diving into the differences between crypto stocks and crypto, it's important to understand what each of these terms means.

• Crypto Stocks: These are publicly traded companies that operate businesses highly exposed to the cryptocurrency market or blockchain technology. Examples include popular crypto exchanges, cryptocurrency miners, blockchain technology specialists, and companies with large cryptocurrency holdings on their balance sheets. Crypto stocks can be highly correlated with cryptocurrency price fluctuations, making them extremely volatile and unpredictable.
• Crypto: Cryptocurrencies, on the other hand, are digital or virtual currencies that use cryptography for security. They are often decentralised, leveraging blockchain technology, which is a decentralised ledger system that validates and records transactions. Cryptocurrencies can be used as a medium of exchange, a store of value, or a utility token.

Key Differences:

• Ownership: Crypto stocks represent ownership in a company, while cryptocurrencies are not tied to any specific company or entity.
• Regulation: The stock market is highly regulated and operates through established exchanges. In contrast, cryptocurrency markets are less regulated and more decentralised, with varying levels of global regulation.
• Volatility and Risk: Cryptocurrencies are highly volatile and prone to wild price fluctuations driven by speculation and investor sentiment. Stocks are generally less volatile and are tied to the financial performance of the underlying company.
• Dividends: Stocks may offer dividends to shareholders, while cryptocurrencies do not provide this benefit.
• Purpose: Crypto stocks are primarily an investment or ownership stake, while cryptocurrencies can be used for transactions, smart contracts, or as a store of value.
• Accessibility: Crypto markets are accessible 24/7 for trading, while stocks are typically traded during specific market hours.
• Returns: Cryptocurrencies offer the potential for high returns due to their volatility and newness, but this also comes with a higher risk of losses. Stocks have historically provided solid long-term returns, typically around 10% per year.
• Tangibility: Stocks are tied to tangible, real-world business activities, while cryptocurrencies are intangible and exist solely in the digital realm.

The choice between investing in crypto stocks or crypto depends on your risk tolerance, financial goals, and understanding of each asset class. Stocks are considered more traditional investments tied to the performance of real-world companies, while cryptocurrencies offer new opportunities in a rapidly evolving digital landscape.

If you're considering investing in cryptocurrencies, it's crucial to understand the risks and volatility associated with them. They are highly speculative and lack the backing of tangible assets. On the other hand, stocks have a long history of delivering solid returns and are backed by the financial performance of the companies they represent.

Crypto stocks and risk

Investing in cryptocurrencies like Bitcoin is a risky business. Crypto is a volatile asset, and its value is determined by whether or not people want to buy it. This means that its price can fluctuate wildly, and investors can experience huge gains or losses.

Crypto is also not regulated like stocks or insured like cash in a bank. It is susceptible to scams and cyberattacks, and there is no way to retrieve your money if it is stolen by a hacker.

However, some companies have performed extremely well in the crypto space. For example, Coinbase Global Inc. (COIN), which operates one of the largest cryptocurrency exchanges in the world, saw returns of 195.5% in 2023. Similarly, Marathon Digital Holdings Inc. (MARA), one of the largest Bitcoin mining companies in the US, saw returns of 391.5% in the same year.

If you're looking to invest in crypto, it's important to proceed with caution. Here are some tips to help you navigate the risks:

• Only invest money you can afford to lose.
• Be wary of "finfluencers" and unsolicited offers on social media or CashApp.
• Do your research before investing in a crypto company.
• Consider additional security measures like encrypted wallets and offline cold storage.
• Invest in a diverse range of coins, rather than putting all your money into one currency.
• Remember that crypto is a long-term investment, and you should be prepared to hold your investment for at least five years.
• Don't neglect traditional stocks, which can provide more stable, long-term wealth-building opportunities.

In conclusion, while crypto stocks offer the potential for huge gains, they also come with significant risks. It's important to understand these risks and proceed with caution before investing.

Crypto stocks and diversification

Crypto Stocks Overview

Cryptocurrency stocks are publicly traded companies that operate businesses heavily exposed to the cryptocurrency market or blockchain technology. These include crypto exchanges, crypto miners, blockchain specialists, and companies with large crypto holdings. Crypto stocks are highly correlated with crypto price fluctuations, making them extremely volatile and unpredictable.

Diversification Strategies

• Market Leaders: Allocate funds to cryptocurrencies with the largest market caps, such as Bitcoin and Ethereum.
• Different Use Cases: Invest in cryptocurrencies with varied use cases, including payment coins, DeFi platforms, gaming coins, metaverse platforms, and privacy coins.
• Smart Contract Blockchain Networks: Invest in blockchain networks that can run smart contracts, such as Ethereum and Avalanche.
• Stocks: Invest in crypto-related stocks, such as crypto mining and hardware companies, or companies with large crypto holdings, like MicroStrategy.
• Growth Potential: Invest in smaller crypto tokens with greater growth potential, though these come with higher risk.
• Rebalancing: Regularly rebalance your portfolio to maintain your desired asset allocation as prices fluctuate.

Benefits of Diversification

A diversified crypto portfolio offers several advantages:

• Reduced Volatility: Diversification can stabilise portfolio value during market turbulence.
• Rebalancing Opportunities: Strong performance in one crypto investment can allow for rebalancing and diversification into other assets.
• Learning Opportunities: Diversification encourages investors to learn about various crypto projects and investment opportunities.

Drawbacks of Diversification

There are also some potential disadvantages to consider:

• Lower Absolute Returns: Diversification may lead to lower overall returns compared to investing heavily in a single speculative project that succeeds.
• Tax Consequences: Diversifying by selling or trading crypto assets may trigger tax liabilities for investors.
• Research Requirements: Diversification requires time and effort to research and develop a customised diversification strategy.

Example Crypto Stocks

• Block Inc. (SQ): A digital and mobile payment platform, including Cash App, which allows users to buy, sell, send, and receive Bitcoin.
• Coinbase Global Inc. (COIN): Operates one of the largest cryptocurrency exchanges in the world, providing financial infrastructure for the "crypto economy".
• Marathon Digital Holdings Inc. (MARA): One of the largest Bitcoin mining companies, providing transaction verification, custody verification, and blockchain security services.
• Riot Platforms Inc. (RIOT): A cryptocurrency mining company that independently mines Bitcoin and provides co-location services and critical infrastructure for institutional-scale mining operations.
• PayPal Holdings, Inc. (PYPL): A technology platform that facilitates digital and mobile payments, allowing users to buy, transfer, and sell cryptocurrencies.

Diversification is a crucial aspect of managing a crypto portfolio to avoid overexposure to a single investment or asset class. By diversifying across different coins, industries, and asset classes, investors can reduce volatility and improve their chances of strong returns. However, diversification requires careful research and consideration of one's investment strategy, risk tolerance, and financial goals.

Crypto stocks and long-term investment

Crypto Stocks Overview

The crypto market has grown exponentially since Bitcoin's (BTC) inception in 2009, now encompassing a wide array of coins, blockchains, exchanges, and payment processors. Crypto stocks are publicly traded companies that operate businesses heavily exposed to the cryptocurrency market or blockchain technology. These include crypto exchanges, crypto miners, blockchain specialists, and companies holding large amounts of crypto on their balance sheets.

Crypto Stocks and Volatility

Crypto stocks can be highly correlated to cryptocurrency price fluctuations, making them extremely volatile and unpredictable. However, with the troubles crypto has faced, some companies have diversified beyond blockchain and crypto to help mitigate this market volatility.

Large-Cap Cryptos Are Safest

Similar to blue-chip stocks, the biggest cryptocurrencies will likely weather the storm best during a crypto bear market. Bitcoin (BTC), with its massive market cap and institutional adoption, is the safest bet. Ethereum (ETH), the leading smart contract blockchain, is another top choice.

Crypto Stocks to Consider

• CME Group (CME): One of the first international stock exchanges to offer Bitcoin futures trading.
• PayPal Holdings, Inc. (PYPL): A leading technology platform that facilitates digital and mobile payments, allowing users to buy, transfer, and sell various cryptocurrencies.
• Block Inc. (SQ): A digital and mobile payment platform and the parent company of Square and Cash App, which allow users to buy, sell, send, and receive Bitcoin.
• Interactive Brokers Group Inc (IBKR): An international brokerage that trades stocks, options, futures, and more, with commodities futures trading offering customers a chance to trade crypto futures.
• SoFi Technologies Inc (SOFI): A financial services company offering a secure platform for trading cryptocurrencies, as well as loans, mortgages, credit cards, banking, and insurance.
• Marathon Digital (MARA): One of the largest and most valuable pure-play Bitcoin mining stocks, focusing on sustainable mining practices.
• MicroStrategy Inc. (MSTR): A company that provides business intelligence and cloud-based enterprise technology services but is known for its heavy reliance on digital assets, particularly Bitcoin, to boost its corporate balance sheet.
• Riot Platforms Inc. (RIOT): A Colorado-based cryptocurrency mining company that independently mines Bitcoin and provides critical infrastructure for related operations.
• Coinbase Global Inc. (COIN): Operates one of the largest cryptocurrency exchanges in the world, engaging with regulatory communities to offer a regulated venue for crypto trading.
• Hive Digital Technologies Ltd. (HIVE): A cryptocurrency mining company operating in Canada, Sweden, and Iceland, offering cloud computing services and data center solutions.

Long-Term Investment Strategies

When considering long-term crypto investments, here are some strategies to keep in mind:

• Buy-and-Hold: This strategy involves finding cryptos with significant long-term upside potential and holding onto them for the long term, riding out the short-term volatility.
• Dollar-Cost Averaging: This approach involves committing to buying a set dollar amount of a particular cryptocurrency regularly, regardless of market conditions, to take the emotion out of investing and block out market volatility.
• ETFs for Diversification: Exchange-Traded Funds (ETFs) can be used to diversify a long-term crypto portfolio, especially for investors who prefer not to invest directly in the crypto market.

Final Thoughts

Crypto investing should be viewed through a long-term lens, as short-term trading in the volatile crypto markets can be risky. It's important to remember that most cryptocurrency investors are deep in the red for the year, and a long-term focus can help build real wealth.

Frequently asked questions