How to Invest Indirectly in Cryptocurrency
In Brief: How to Invest in crypto without directly investing in the crypto ecosystem.
Investing in cryptocurrency is no longer a new concept. Bitcoin was the first transaction on January 12, 2009, when Satoshi Nakamoto, the pseudonymous creator of the Bitcoin system, sent Hal Finney, a well-regarded cryptographer and computer scientist, 10 BTC. It was 14 years ago. Nevertheless, the nature of cryptocurrencies made some investors reluctant to invest in them.
Here are some alternatives to investing in cryptocurrencies.
Stocks – Crypto-related companies listed on Nasdaq.
There are several crypto-related companies that are currently listed on the US stock exchange. There are a lot of different ways in which cryptocurrencies can be involved, either directly or indirectly, in blockchain technology.
Here are some of the most well-known ones include:
1. Coinbase Global Inc. (COIN)
Coinbase is one of the largest cryptocurrency exchanges in the world and was the first major crypto company to go public on NASDAQ in April 2021. The company’s stock price is currently traded at $61.18. It dropped -64.58% along with the rest of the crypto world. Nevertheless, till February 22, 2022, alone, its YTD had risen 82.08%.
2. Riot Blockchain Inc. (RIOT)
Riot Blockchain is a Bitcoin mining company that focuses on creating a more decentralized blockchain ecosystem. As a leader in blockchain technology, Riot Platforms is well-positioned to benefit from the industry’s tailwinds. The company’s currently traded at $6.35 with an 88.43% YTD increase.
Ken Griffin’s Citadel Investment Group holds the largest stake in the company, valued at $6.6 million as of December 31, 2022.
3. Marathon Digital Holdings Inc. (MARA)
As another Bitcoin mining company focused on energy efficiency and sustainability, Marathon Digital Holdings engages in mining cryptocurrencies, with a focus on the blockchain ecosystem and generating digital assets. The company announced that it produced 687 Bitcoin in January 2023, up 45% from 475 which was the company’s Bitcoin production in December 2022.
**In the weeks leading up to Marathon Digital Holdings, Inc.’s next earnings release, which is scheduled for February 28, 2023, the company will try to display strength.
4. MicroStrategy Inc. (MSTR)
MicroStrategy is a business intelligence company that acts as a provider of enterprise analytics and mobility software. It offers a MicroStrategy Analytics platform that delivers reports and dashboards and enables users to conduct ad hoc analysis and share insights.
The company does not involve directly in cryptocurrency. However, MicroStrategy Inc has invested heavily in Bitcoin as a reserve asset. MicroStrategy and its subsidiaries hold about 130,000 Bitcoin which currently amounted of $3.144.
5. PayPal Holdings, Inc (PYPL)
The payment giant is one of the leaders in the blockchain industry and a pioneer in the payments space. There is no doubt that as a pioneer in the adoption of cryptocurrency, PayPal Holdings, Inc has invested heavily in blockchain initiatives. It lets users transact cryptocurrencies natively through its app. In the blockchain industry, PayPal is well-positioned to take advantage of the growth and maintain its leadership position.
The company’s stock price is currently traded at $75.48.
PayPal Holdings, Inc was long by 126 hedge funds at the end of the third quarter of 2022, with positions worth $6.79 billion. Citadel Investment Group holds the company’s most valuable stake, amounting to $481 million as of December 31, 2022.
6. Canaan Inc. (CAN)
Canaan is a Chinese company that developed supercomputing chips and the manufacturer of digital blockchain computing equipment, as well as the supplier of, is the overall scheme for computer software and hardware of digital blockchain.
The company designs and manufactures application-specific integrated circuits (ASICs) for blockchain-related applications. In addition, Canaan Inc. is one of the world’s largest manufacturers of mining rigs for Bitcoin and has a strong presence in the cryptocurrency mining and blockchain industries as well.
Funds that invest in cryptocurrencies
Cryptocurrencies are included in the portfolios of a wide range of investment funds, from traditional mutual funds to exchange-traded funds (ETFs). Here are a few examples:
Grayscale Bitcoin Trust (GBTC): GBTC is a publicly traded trust that invests in Bitcoin. It is one of the largest and most well-known crypto funds, and it trades on the OTCQX market.
Pantera Bitcoin Fund: This fund is a hedge fund that invests exclusively in Bitcoin. It has been in operation since 2013 and is managed by Pantera Capital, a blockchain investment firm.
Bitwise 10 Crypto Index Fund (BITW): BITW is an ETF that tracks an index of the 10 largest cryptocurrencies by market capitalization. It provides exposure to a diversified portfolio of cryptocurrencies and is listed on the NYSE Arca.
ARK Next Generation Internet ETF (ARKW): This ETF invests in companies that are involved in emerging technologies, including blockchain and cryptocurrencies. It holds a variety of crypto-related companies in its portfolio, such as Square and Coinbase.
Galaxy Digital Holdings Ltd. (GLXY): Galaxy Digital is a publicly traded company that invests in cryptocurrencies and blockchain-related projects. It is listed on the Toronto Stock Exchange and the NASDAQ.
Why have investors invested in crypto companies and not crypto directly?
Investment in a stock of a crypto-related company has several advantages over investing directly in crypto itself, and the following are some reasons why investors might choose to do so:
First of all, is diversification. Investing in a company that is involved in the crypto space can provide diversification for an investor’s portfolio. The risk of investing in crypto-related companies can be spread out by ensuring that the company is exposed to multiple cryptocurrencies and blockchain-related technologies, which can help to mitigate the risk for the investor.
Second is regulatory risks which means by investing directly in crypto can be risky due to the lack of regulation and oversight in the crypto market. A regulated and traditional financial system-based company may make investors feel more comfortable and secure about their investment.
Next is expertise where Crypto-related companies often have a team of experts who understand the complexities of the crypto market and can make informed investment decisions. By investing in a company with this expertise, investors may feel more confident in the potential returns on their investment.
Accessibility is another important factor as some investors may find it easier to invest in a company’s stock than to navigate the process of buying and storing cryptocurrencies. Investing in a company’s stock is a more familiar and accessible process for many investors.
Last but not least is liquidity: Crypto-related companies that are publicly traded on major exchanges can provide liquidity that may not be available in the crypto market. This can be important for investors who may need to sell their investments quickly or easily.
The advantages of investing in crypto trust funds.
Investing in a crypto trust fund can have several advantages compared to investing in other types of funds such as
Diversification: Crypto trust funds often invest in a diversified portfolio of cryptocurrencies, which can help to spread out an investor’s risk. This is important because the cryptocurrency market can be highly volatile and subject to sudden price swings.
Professional Management: Crypto trust funds are typically managed by professional investment managers who have expertise in the crypto market. This can provide investors with a level of expertise that they may not have themselves.
Convenience: Investing in a crypto trust fund can be more convenient than buying and storing cryptocurrencies directly. The trust fund takes care of the buying, selling, and storing of cryptocurrencies, making the investment process easier for investors.
Liquidity: Some crypto trust funds are publicly traded on major exchanges, which can provide liquidity that may not be available in the crypto market. This can be important for investors who may need to sell their investments quickly or easily.
It is important to note that the cryptocurrency market can be highly volatile and subject to sudden price swings in addition to the fact that the value of a crypto trust fund can fluctuate based on how the underlying cryptocurrencies perform. Investing in a crypto stock or crypto trust fund can still be risky, and investors should do their own research before investing
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None of the material above or on our website is to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument. Investors should carefully consider if the security and/or product is suitable for them in view of their entire investment portfolio. All investing involves risks, including the possible loss of money invested, and past performance does not guarantee future performance.