Crypto Stocks: Your Britannica Guide

Intrigued by the potential of cryptocurrency investments, but hesitant to directly purchase Bitcoin or other digital currencies? Consider the option of investing in publicly traded companies involved in the cryptocurrency or blockchain ecosystem.

Crypto stocks represent ownership in publicly listed entities that have significant business operations tied to cryptocurrency or blockchain technology. If you understand the basics of the stock market, you can explore multiple avenues to participate in the crypto evolution without needing to manage a cryptocurrency wallet.

Just as the companies themselves vary, so too do cryptocurrency stocks, offering a range of investment options. Let’s examine four primary methods for investing in crypto stocks, highlighting some leading publicly traded companies and funds engaged in the blockchain revolution.

Keep in mind that the cryptocurrency market has a history of volatility. Companies heavily invested in crypto are likely to experience greater price swings.

1. Invest Directly in Cryptocurrency Companies

One way to gain exposure to crypto and blockchain technology, without direct cryptocurrency ownership, is to invest in public companies directly involved in the cryptocurrency industry. This includes cryptocurrency exchanges, mining operations, and manufacturers of specialized mining hardware.

• Exchanges. These digital platforms facilitate the buying and selling of cryptocurrencies and related derivatives. Coinbase (COIN), a dedicated crypto exchange, went public in 2021. The CME Group (CME), a major futures market, lists futures and options contracts for Bitcoin (BTC) and Ether (ETH), although these constitute a small portion of its overall trading volume.
• Mining Companies. These businesses generate revenue by producing new cryptocurrency and maintaining blockchain networks. Publicly traded examples include Riot Platforms (RIOT), Marathon Digital Holdings (MARA), and Hut 8 Mining (HUT).
• Mining Hardware Manufacturers. Crypto mining involves solving complex mathematical problems to earn cryptocurrency rewards. This requires specialized hardware. If you believe demand for mining hardware will continue, consider investing in companies that manufacture these products, such as NVIDIA (NVDA) and Advanced Micro Devices (AMD).

2. Invest in Companies Holding Significant Cryptocurrency

Some publicly traded companies, across various sectors, hold significant amounts of cryptocurrency on their balance sheets. Buying shares in these companies offers indirect exposure to the crypto market. Their stock prices tend to correlate with cryptocurrency values more closely than those of companies with no crypto holdings.

Examples of publicly traded companies with substantial cryptocurrency holdings include:

• Block (SQ). Formerly Square, Block is a fintech company focused on payment solutions for businesses and individuals. Block operates Square and Cash App. The company has gained attention through its cryptocurrency holdings, which led to balance sheet write-downs in 2022.
• MicroStrategy (MSTR). This enterprise analytics platform has been a major corporate investor in cryptocurrency, holding over 132,500 Bitcoin at the close of 2022. MicroStrategy’s Bitcoin investment strategy serves as a financial driver and marketing tool.
• Tesla (TSLA). The electric vehicle manufacturer provides balance sheet exposure to cryptocurrency. In 2022, the company’s Bitcoin holdings resulted in a $204 million impairment loss, underscoring the volatility of digital assets.
• MassMutual (MCI). This established insurance company made headlines in 2020 by allocating $100 million to cryptocurrency on its balance sheet. MassMutual has also invested in a crypto company and introduced new product lines to expand access to digital currencies for advisors and clients.

3. Invest in Companies Innovating with Blockchain Technology

Another avenue for cryptocurrency investment exposure involves companies leveraging blockchain technology for innovation. Blockchain has diverse applications, with cryptocurrency being just one aspect of this decentralized technology.

Many companies are using blockchain in various industries:

• Technology. Many technology companies are implementing blockchain solutions to improve their products and services. IBM (IBM), a long-standing tech firm, leads in offering blockchain-based services to businesses. NVIDIA, in addition to manufacturing mining hardware, developed a blockchain platform for the gaming industry.
• Ecommerce. Ecommerce companies are using blockchain to improve the efficiency, transparency, and security of their supply chains. Amazon (AMZN) provides blockchain solutions for business customers via Amazon Web Services, while Alibaba (BABA) offers blockchain-as-a-service to support product traceability, supply chain finance, data sharing, and digital content ownership.
• Banking. The rise of fintech is leading many companies to enhance financial services with blockchain. JPMorgan Chase (JPM), a traditional financial institution, was an early adopter of blockchain and has used it to execute cross-border transactions.

4. Invest in Publicly Traded Cryptocurrency Funds

The investment market offers a variety of crypto funds including exchange-traded funds (ETFs) and mutual funds. Mitigate the risk of fraudulent investment by investing in cryptocurrency funds managed by reputable institutions with established track records.

• Exchange-Traded Funds (ETFs). These are passively managed funds holding a collection of assets focused on a theme or sector. A crypto ETF can directly hold cryptocurrencies, such as the Fidelity Advantage Bitcoin ETF (FBTC) or the Invesco Galaxy Bitcoin ETF (BTCO). Alternatively, it may invest in a portfolio of publicly traded crypto stocks, such as the Schwab Crypto Thematic ETF (STCE).
• Mutual Funds. Mutual funds are professionally managed and follow a specific strategy. A crypto mutual fund can invest directly in cryptocurrency, futures contracts, or crypto stocks. Fidelity’s Bitcoin Strategy ProFund Investor Class fund (BTCFX) invests in Bitcoin futures contracts.

The Takeaway

If you prefer not to purchase cryptocurrency directly, numerous options exist. Cryptocurrency and blockchain investors can gain portfolio exposure to the space without directly purchasing digital assets.

Before investing in crypto stocks, or any investment, conduct thorough research. Consider which crypto stocks or funds best align with your goals and risk tolerance. Be prepared for potential market fluctuations.

The companies and funds mentioned here are for educational purposes only and do not constitute an endorsement.

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