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Bitcoin Stocks

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Bitcoin Stocks: A Guide to Investing in Bitcoin through Traditional Markets

In this guide, you will learn about the relationship between Bitcoin and traditional markets, as well as the benefits and risks of investing in Bitcoin through stocks. The guide will also cover how to choose, evaluate, and analyse stocks with Bitcoin exposure, along with investing strategies and common mistakes to avoid. The guide will conclude with a discussion on the future of cryptocurrencies and traditional markets.

Introduction to Bitcoin Stocks

Investors can gain exposure to Bitcoin through traditional markets by investing in stocks that have direct or indirect exposure to Bitcoin. This can be done through companies that mine Bitcoin, provide Bitcoin-related services, or hold Bitcoin on their balance sheets. The benefits of investing in Bitcoin through stocks include lower risk and greater diversification, as well as the opportunity to participate in the growth of the Bitcoin market without directly holding Bitcoin.

Relationship between Bitcoin and Stocks

The relationship between Bitcoin and the stock market is both intricate and evolving. While some view Bitcoin as a disruptive force to traditional finance, potentially impacting stock prices negatively, others see a complementary dynamic between Bitcoin and stocks, offering mutual benefits. The increasing acceptance of Bitcoin as a payment method by companies could boost Bitcoin demand, thereby enhancing the value of stocks associated with Bitcoin. Conversely, the prospect of heightened regulation over Bitcoin might adversely affect these stock values.

Investors are advised to stay abreast of the rapidly shifting landscape of the Bitcoin market and its potential impact on stock investments. This involves regular monitoring of market news and data, along with a detailed analysis of financial statements and other pertinent information.

Investing in stocks with Bitcoin exposure, such as those of companies that hold significant amounts of Bitcoin or are involved in Bitcoin-related activities (like mining or payment services), can offer indirect exposure to Bitcoin's price movements. This method allows investors to participate in the potential growth of Bitcoin while also benefiting from the stability and regulatory framework of traditional stock markets.

However, this approach does not entirely insulate investors from the inherent risks associated with Bitcoin's volatility. The value of these stocks is still dependent on Bitcoin's market performance, and a significant drop in Bitcoin's price could negatively impact these stocks. Moreover, these stocks may also be influenced by other factors unrelated to Bitcoin, such as the company's overall performance, industry trends, and broader market movements.

Investors should also be aware that investing in stocks with Bitcoin exposure does not provide the same level of direct investment in Bitcoin. They won't own the Bitcoin itself, and therefore, they won't experience the same gains (or losses) as they would from directly holding the cryptocurrency.

In summary, while investing in stocks with Bitcoin exposure can offer a more diversified and potentially less volatile way to gain exposure to Bitcoin's growth, it still carries risks and does not fully replicate the experience of direct Bitcoin investment.

Such a balanced perspective is vital for navigating the complex and interconnected realms of Bitcoin and the stock market, emphasising the need for informed and prudent investment strategies.

Introduction to Bitcoin Stocks
Relationship between Bitcoin and Stocks

Understanding Bitcoin

To full understand Bitcoin, you first have to comprehend its origins and the purpose behind its creation. If you have not already. The best place to start that journey, would be in our What is Money ? section.

Understanding Bitcoin

Risks of Bitcoin Stocks

Put simply you are trying to get exposure to Bitcoin via the financial markets.

It is therefore worth noting the Financial Conduct Authority (FCA) Risk warning for people that investing directly into Cryptoassets.

"Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 minutes to learn more."

When you click the Take 2 minutes to learn more. it leads to:

 

UK Risk Disclaimer

Estimated reading time: 2 min 

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest 

  • The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets. 
     

  • The cryptoasset market is largely unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
     

2. You should not expect to be protected if something goes wrong 

  • The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here. 
     

  • The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm. Learn more about FOS protection here
     

3. You may not be able to sell your investment when you want to 

  • There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time. 
     

  • Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
     

4. Cryptoasset investments can be complex 

  • Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment. 
     

  • You should do your own research before investing. If something sounds too good to be true, it probably is.
     

5. Don’t put all your eggs in one basket 

  • Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
     

A good rule of thumb is not to invest more than 10% of your money in high-risk investments. 5 questions to ask before you invest.
 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here
 

For further information about cryptoassets, visit the FCA’s website here.

We would suggest, if you are investing in stocks to get exposure to the underlying Cryptoasset, yes its a listed stock but remember the stocks you are buying are buying the underlying! 

Risks of Bitcoin Stocks

Popular Stocks with Bitcoin Exposure

The stocks listed operate in one or more of these sectors, and each has exposure to Bitcoin in different ways.

 

Cryptocurrency investment companies:

These companies have invest into Bitcoin as a way to generate returns for their investors.

MicroStrategy (MSTR)   For more information on MicroStrategy

Cryptocurrency mining companies:

These companies use powerful computers to solve complex mathematical problems and earn cryptocurrency as a reward.

Riot Blockchain (RIOT)

Marathon Digital Holdings (MARA)

Cryptocurrency exchanges

These are online platforms that allow users to buy, sell, and trade cryptocurrencies like Bitcoin and Ethereum.
​Coinbase (COIN)

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Payment processing companies:

These companies facilitate transactions between buyers and sellers, and often offer cryptocurrency payment options alongside traditional fiat currencies.

Block formerly Square (SQ)

PayPal (PYPL)

Graphics processing units (GPUs) manufacturers:

These companies produce the powerful computer chips that are used in cryptocurrency mining.

Nvidia (NVDA)

Advanced Micro Devices (AMD)

Popular Stocks with Bitcoin Exposure

Overview of stocks with Bitcoin Exposure

MicroStrategy Incorporated (MSTR)

MicroStrategy Incorporated, a publicly traded business intelligence firm established in 1989, has developed a strong presence in the enterprise software arena, offering solutions in business intelligence, mobile software, and cloud-based services. Over the years, the company has pivoted significantly towards integrating cryptocurrency into its investment strategy, particularly Bitcoin.

The company's foray into the cryptocurrency world began in August 2020 when CEO Michael Saylor, a staunch advocate for Bitcoin, led MicroStrategy to purchase 21,454 bitcoins for $250 million. This initial investment marked the beginning of a series of additional Bitcoin acquisitions, culminating in a total holding of approximately 189,150 BTC as of early 2024. This shift towards cryptocurrency, especially Bitcoin, represents a substantial portion of the company's market capitalization and underscores its commitment to digital assets.

Saylor's promotion of Bitcoin as a preferable store of value over traditional fiat currencies aligns with his views on the financial system's future. He frequently cites concerns such as inflation and the devaluation of fiat currencies as key reasons for preferring Bitcoin over cash holdings. This innovative approach to corporate investment in cryptocurrency has been both applauded for its forward-thinking nature and scrutinized due to the associated risks and market volatility.

MicroStrategy's stock has been notably influenced by its Bitcoin investments, exhibiting significant price fluctuations that mirror the highly volatile nature of the cryptocurrency market. Despite the risks, the company's bold move into Bitcoin has been a significant development in the cryptocurrency market, illustrating the growing interest and potential for traditional companies to invest in this emerging asset class.

As of 2024, MicroStrategy's decision to heavily invest in Bitcoin continues to play a pivotal role in shaping its financial trajectory and market perception. While the strategy presents potential high rewards, it also exposes the company to the inherent risks and volatility of cryptocurrency markets​.

For more information on MicroStrategy

Riot Blockchain (RIOT)

Riot Blockchain is a company that specializes in Bitcoin mining and has recently expanded its operations to include other cryptocurrencies. The company has been growing rapidly in recent years, as the demand for Bitcoin mining has increased. Riot Blockchain also invests in various blockchain-related projects, signaling its belief in the future of the technology.

 

Marathon Digital Holdings (MARA)

Marathon Digital Holdings is another Bitcoin mining company that has seen significant growth in recent years. The company has been investing heavily in Bitcoin mining equipment and infrastructure, and has been expanding its operations to include other cryptocurrencies. Marathon Digital Holdings sees cryptocurrencies as a key part of the future of finance, and has been working to position itself as a leader in the industry.

 

Coinbase (COIN)

Coinbase is one of the largest cryptocurrency exchanges in the world and provides significant exposure to the crypto market through its platform. The company allows users to buy, sell, and store cryptocurrencies, and has been instrumental in bringing cryptocurrencies to a wider audience. Coinbase went public in April 2021 and its IPO was seen as a significant milestone for the cryptocurrency industry.

 

Block formerly Square (SQ)

Block is a payment processing company that has invested in Bitcoin and provides Bitcoin trading through its Cash App. The company has invested $50 million in Bitcoin and allows users to buy, sell, and hold Bitcoin through its app. Block has been a vocal proponent of Bitcoin and sees the cryptocurrency as a key part of its future growth strategy.

 

PayPal (PYPL)

PayPal has recently entered the crypto market and allows users to buy, sell, and hold cryptocurrencies on its platform. The move was seen as a significant step forward for the cryptocurrency industry, as it brought cryptocurrencies to a wider audience. PayPal has also invested in various blockchain and crypto-related projects, signaling its belief in the future of the technology.

 

Nvidia (NVDA)

While not a crypto-specific company, Nvidia produces high-performance graphics processing units (GPUs) that are used for cryptocurrency mining. The company has seen increased demand for its GPUs due to the growth of the cryptocurrency mining industry, and has been working to meet this demand by releasing new products specifically designed for mining.

 

Advanced Micro Devices (AMD)

Like Nvidia, AMD produces GPUs that are used for cryptocurrency mining. The company has also seen increased demand for its products due to the growth of the mining industry, and has been working to release new products to meet this demand.

Overview of stocks with Bitcoin Exposure
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