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Crypto assets gained popularity for groundbreaking opportunities but there is no denying they are still a high-risk investment. Luckily, there is a middle ground between going all in and sticking to the stock market: cryptocurrency stocks. Find out more about this kind of assets and see if it is worth picking over purchasing crypto directly.
Key Takeaways
- Stocks and assets correlated to crypto market price movements for fundamental reasons are colloquially known as cryptocurrency stocks.
- This is not a monolithic category but instead includes companies that work with crypto payments, engage in Bitcoin mining, or hold BTC and other cryptocurrencies on their balance.
- Investing in cryptocurrency stocks is an option for those who want to gain limited exposure to the digital asset market without taking too many inherent risks.
What Do We Mean by Cryptocurrency Stocks
Unlike the crypto market, trading stocks has a history that spans centuries. With this baggage comes a set of qualities that digital assets do not quite have yet like legal protections and lower risks. At the same time, crypto markets offer new possibilities like truly global trading around the clock, at the cost of lower liquidity and higher volatility. While some dared to venture into the new territory, other investors prefer something that combines the best of both worlds.
Cryptocurrency stocks or crypto stocks for short are a category of assets representing shares in companies with exposure to the crypto market. There are many variations of those depending on how close to the crypto space the company is but they are often categorized under this umbrella term. The exposure can come from the company’s holdings or the use of its goods in industries like Bitcoin mining.
It is important to understand that cryptocurrencies and digital assets are not the same as stocks. While the use of the same language might be confusing, crypto assets are not just financial instruments but can be used outside of the market as a means of payment or store of value. They are also traded not in the stock market but on dedicated exchanges.
Another important distinction is that a crypto stock does not always mean direct exposure to the crypto market. Sometimes, the relationship between the novel financial space and the company is not too close and its stock is at best correlated to the digital currency markets. However, this year, crypto-backed derivatives broke new ground, and investors looking for exposure to these high-risk assets have more options.
Most Prominent Cryptocurrency Stocks
To give you a feel for the diversity of companies and stocks represented by this term, let’s group some of them according to their degree of exposure to the industry and assets themselves.
Companies in the Crypto Industry
First off, although there are not a lot, there are publicly traded crypto companies. The best-known example is the US-based crypto exchange Coinbase Global (COIN). When it debuted in 2021, for a long time it served as an indicator of the state of the crypto market for those not invested in it. Since then, more crypto companies have gone public, for example, Exodus Movement Inc. (EXOD).
Before that, public crypto companies were mostly in the mining industry. In other words, they perform crypto mining operations (mostly Bitcoin) on a large scale. Some examples are Marathon Digital Holdings (MARA), Riot Platforms (RIOT), and Hut 8 Mining (HUT). As miners, they also typically hold large amounts of cryptocurrency on their balance.
Mining equipment manufacturers also fall into this category, although more often than not it is not their primary source of revenue. Chips by Taiwan Semiconductor Manufacturing Company Ltd. (TSM:NYSE) are ubiquitous in ASIC processors, in turn, produced by companies like Canaan Inc. (CAN) and BTC Digital Ltd. (BTCT). Although GPU mining is less popular than before due to Ethereum ditching mining entirely, a lot of coins are being secured by hardware made by NVIDIA (NVDA) and Advanced Micro Devices (AMD).
Major Bitcoin Holders
While the previous category’s reps have revenue streams going through the crypto market, this group experiences another type of influence from the digital asset space. These companies report holding crypto on their balance sheets, implying some exposure to the market. After all, if the value of assets on the company’s balance goes up or down, its perceived value must follow suit.
Probably the best-known example in this category is software and analytics company Microstrategy Inc. (MSTR). The company holds 252,220 BTC purchased since 2020, worth $16.6B as of the time of writing. Its executive chairman Michael Saylor is a so-called “Bitcoin maximalist”: he has been on record multiple times stating his belief in nothing less than Bitcoin superiority.
After Marathon Digital Holdings Inc. and Riot Platforms, the fourth-largest BTC holder among public companies is electric car manufacturer Tesla Inc. (TSLA). Since selling 75% of its 2021 BTC purchase due to public backlash over environmental concerns, it holds 9,720 Bitcoins on its balance.
Another well-known company that publicly discloses Bitcoin balances is Block, Inc. (SQ), known for the CashApp and Square apps. Founded by another vocal “BTC maxi” Jack Dorsey, Block has recently topped up their 8,211 BTC stash.
Blockchain Technology Adopters
The companies that make use of blockchain technology or render services for other crypto companies can be considered loosely involved in the space. Although we covered NVIDIA in a previous section, it fits into this category as well thanks to its blockchain tech products.
Blockchain-based solutions are offered by IBM, Alibaba (BABA), and Amazon (AMZN) through Amazon Web Service. Among banks, JPMorgan Chase (JPM) is one of such institutions using blockchain technology to innovate cross-border transfers and settlements.
Arguably, this category can more aptly be described as blockchain stocks, since they use the technology but do not necessarily get involved in dealing with cryptocurrencies or trading in the crypto market.
Digital Currency Derivatives
There is no single definition for cryptocurrency stocks, and depending on how you understand the idea, crypto-backed exchange-traded funds (ETFs) and mutual funds fit the bill. These assets can include other crypto stocks, cryptocurrencies as is, or derivatives backed by them.
Fidelity Advantage Bitcoin ETF (FBTC) and Invesco Galaxy Bitcoin ETF (BTCO) are backed by BTC owned and managed by the issuer. Bitcoin Strategy ProFund Investor Class fund (BTCFX) by Fidelity is a mutual fund that invests in BTC futures. Last but not least, Schwab Asset Management’s Crypto Thematic ETF (STCE) tracks a basket of 36 stocks in crypto companies, mining pools, tech businesses, and exchanges that list crypto-backed papers.
Which Should You Go For
Both options — owning crypto or going for cryptocurrency stocks — have their uses and benefits. See the table for some ideas on when to opt for one or the other.
| Benefits of Owning Cryptocurrency Stocks | Benefits of Holding Digital Assets |
| Opportunity to trade instruments with diverse backing | Direct exposure to the asset with no intermediaries and associated expenses |
| Lower volatility and financial risks | Higher volatility of cryptocurrency prices means a higher risk-reward ratio |
| No custody risks (i.e. risks connected with storing the assets and cryptographic keys securely) | Full ownership of the funds |
| Correlation to the crypto market can provide more opportunities to capitalize on price movements | Opportunity to capitalize on decoupling from the stock market |
Conclusion
If you are more used to the customs of the stock market, there is no reason to miss out on the crypto train. Do your homework on cryptocurrency stocks and test the waters without taking the plunge. Remember, whenever you’re ready, ChangeHero can make your crypto journey smooth and painless.
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Frequently Asked Questions
What is the best crypto stock?
There are dozens of cryptocurrency stocks in companies ranging from mining equipment manufacturers to large Bitcoin owners. Each of these assets comes with its own fundamentals and opportunities, so it is best to research which one suits your individual needs and risk appetites the most.
What stock owns Bitcoin?
According to BiTBO Treasuries, out of 92 tracked entities that hold Bitcoin, 42 are public companies. Some of the largest holders are Microstrategy, Marathon Digital Holdings, Riot Platforms, and Tesla.
What are the best Bitcoin stocks to buy?
Various Bitcoin-backed financial instruments and correlated stocks come with different fundamentals. There is no definitive best Bitcoin-related stock.
Who is the largest shareholder of MicroStrategy?
According to Yahoo Finance, the largest shareholder of MSTR (17.26M) is Capital International Group.
How much Bitcoin does MicroStrategy own?
As of October 2024, Bitcoin holdings on the balance of Microstrategy account for 252,220 bitcoins.
What stocks track crypto?
Stocks that for one reason or another are correlated to crypto prices are called cryptocurrency stocks. Some of them are TSLA, NVDA, AMD, IBM, COIN, MARA, and MSTR.
Disclaimer
This article is not financial or investment advice. When dealing with cryptocurrencies, remember that they are extremely volatile and thus, a high-risk investment. Always make sure to stay informed and be aware of those risks. Consider investing in cryptocurrencies only after careful consideration and analysis of your own research and at your own risk.
