Over the past year, interest in cryptocurrency has really exploded. This can be seen from the rally in key coins, such as Bitcoin. The crypto market-cap surpassed $3trn earlier this year. Yet some traditional stock investors might feel uncomfortable buying coins directly. Therefore, here are three ways I can buy stocks that give me exposure to crypto.
Getting involved in the crypto exchanges
The first way is by investing in a crypto marketplace, such as Coinbase. Since going public back in the spring, Coinbase has provided access for stock investors like myself to get a piece of the crypto action. It operates as an online exchange platform, allowing people to buy and sell crypto much in the same way as a traditional stock exchange.
If I believe crypto is going to continue to grow in years to come, then Coinbase shares should rally as well. Higher trading volumes on the platform, more coins listed, more products offered etc etc, will all be positive for the business.
I need to be aware that Coinbase shares will also mirror company-specific issues, such as potential tussles with regulators. But, for the most part, I think if crypto does well, I see Coinbase as a top stock that should benefit.
High volatility with miners
Secondly, I could invest in a crypto mining company like Argo Blockchain. In my opinion, this is as direct as I can go while still buying a listed stock.
Argo generates revenue from the value of the Bitcoin and other coins it mines. So if the price of Bitcoin rallies, then the value of the mined coin will be higher. This will increase profits for the company. It’s a similar way for a commodity miner. If gold prices spike, the share price for a gold miner usually rallies as well.
Therefore, I see Argo (or other alternatives) as top stocks in this regard. Clearly, the sensitivity of the share price to crypto movements is high. This can be seen as a risk, or a positive thing, depending on where I think crypto prices will head in the future!
Using established top stocks
Finally, I buy companies that are working with different cryptocurrencies. For example, Meta (the rebranded Facebook), is making its own digital currency known. Other companies are exploring the possibility of either making a coin, or partnering with an existing one.
I think this is a nice way of using an established top stock to get exposure to crypto. Meta has other core operations (like social media) that generates revenue. If the new currency does well then, great. But ultimately, the share price shouldn’t be as volatile as something like a crypto miner.
The risk is that the share price for these top stocks are unlikely to be that correlated to Bitcoin or other coins. Unless the good news is associated with their specific coin, I don’t see a large amount of upside.
Overall, I think crypto will continue to grow in size in coming years. Therefore, I’m considering all three options (and stocks) as worthy investments at the moment.
The post 3 ways I can use top stocks to get exposure to crypto appeared first on The Motley Fool UK.
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Jon Smith has no position in any share mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.