4 Ways to Invest in Cryptocurrency Stocks

Are you curious about cryptocurrency investing, but hesitant to buy Bitcoin or other tokens? Investing in cryptocurrency or blockchain companies might be the answer.

Cryptocurrency stocks represent shares in publicly traded funds or companies with significant exposure to cryptocurrency or blockchain technology. If you understand the stock market, you can participate in the “crypto revolution” without opening a cryptocurrency account.

Key Points

• Investors can gain cryptocurrency exposure through crypto stocks and funds.
• Crypto stocks are highly diverse, mirroring the companies behind them.
• Crypto investors should always research every investment opportunity thoroughly.

Cryptocurrency stocks vary widely, offering diverse investment choices. Let’s explore four main ways to invest in cryptocurrency stocks and identify some leading publicly traded companies and funds in the blockchain industry.

Remember: Crypto markets are highly volatile. The more a company’s fortunes are tied to crypto, the more volatile its stock will likely be.

1. Buy Stock in Cryptocurrency Companies

One way to gain exposure to crypto and blockchain through investing – without owning cryptocurrency – is to invest in publicly traded companies directly involved in the cryptocurrency sector. These include cryptocurrency exchanges, mining companies, and mining hardware manufacturers.

• Exchanges: Cryptocurrency exchanges are digital platforms that support cryptocurrency buying and selling. Coinbase (COIN), a public company since 2021, is a crypto exchange. CME Group (CME) lists Bitcoin (BTC) and Ether (ETH) futures and options, but these crypto products constitute less than 1% of CME volume daily.

• Mining companies: These generate income from minting cryptocurrency and operating cryptocurrency blockchains. Many are publicly traded, including Riot Platforms (RIOT), Marathon Digital Holdings (MARA), and Hut 8 Mining (HUT).

• Mining hardware manufacturers: Cryptocurrency mining demands specialized, often substantial, hardware. If mining hardware needs will continue to grow, companies manufacturing the equipment can be great investments. NVIDIA (NVDA) and Advanced Micro Devices (AMD) are well-known in this area.

2. Buy Stock in Companies That Hold a Lot of Crypto

Some publicly traded companies, in various sectors, own significant cryptocurrency portfolios on their balance sheets. Buying shares in these companies provides indirect crypto exposure. The share prices of companies with large crypto holdings tend to correlate more with crypto prices than those of companies with no crypto.

Here are some publicly traded companies that hold substantial cryptocurrency assets:

• Block (SQ): Formerly Square, Block is a financial technology company. It made headlines for owning – and taking markdowns on in 2022 – balance sheet cryptocurrency.

• MicroStrategy (MSTR): The enterprise analytics platform MicroStrategy has been a prolific corporate investor in cryptocurrency, holding 132,500 Bitcoin as of late 2022. MicroStrategy is arguably using its Bitcoin holdings as both a financial driver and a marketing strategy.

• Tesla (TSLA): The electric automaker Tesla is another company offering balance sheet exposure to cryptocurrency. Tesla owned enough Bitcoin in 2022 to take a $204 million impairment loss, highlighting the volatility of this digital asset class.

• MassMutual (MCI): This legacy insurance company added $100 million of cryptocurrency to its balance sheet in 2020. MassMutual also invested in a cryptocurrency company as a minority investor and added product lines to increase advisor and client access to digital currency.

3. Invest in Companies Using Blockchain Tech to Innovate

Another investment approach is to own companies using blockchain technology for innovation, where cryptocurrency is just one decentralized technology application.

Companies are leveraging blockchain tech in many ways across industries:

• Technology: Many tech companies are using blockchain-based solutions to evolve and expand their product offerings. IBM (IBM) is at the forefront of offering blockchain-based solutions to businesses. NVIDIA has also developed a blockchain-based platform for the gaming industry.

• Ecommerce: These companies are using blockchain to improve supply chains, making them more efficient, transparent, and secure. Amazon (AMZN) provides blockchain solutions for business clients using Amazon Web Services, while Alibaba (BABA) provides blockchain as a service infrastructure to support product traceability, supply chain finance, data asset sharing, and digital content ownership.

• Banking: With the increase of fintech companies, many are using blockchain to enhance financial services. JPMorgan Chase (JPM) is an example of an institution recognizing the potential of blockchain, and has already used the technology to execute cross-border trades.

4. Buy Shares in Publicly Traded Cryptocurrency Funds

Many cryptocurrency funds are available, including exchange-traded funds (ETFs) and mutual funds. Investors can reduce the risk of fraudulent investment opportunities by choosing funds sponsored by reputable institutions with proven track records.

• Exchange-traded funds: ETFs are passively managed funds holding baskets of stocks or other liquid assets. A crypto ETF might own cryptocurrency directly, like the Fidelity Advantage Bitcoin ETF (FBTC) or the Invesco Galaxy Bitcoin ETF (BTCO), or be a portfolio of publicly traded crypto stocks, such as Schwab Crypto Thematic ETF (STCE).

• Mutual funds: These funds are professionally managed, typically based on a specific strategy or theme. Crypto mutual funds, like crypto ETFs, may hold cryptocurrency directly, invest in cryptocurrency futures contracts, or invest in publicly traded crypto stocks. Fidelity’s Bitcoin Strategy ProFund Investor Class fund (BTCFX) is an example of a mutual fund that invests in Bitcoin futures.

The Bottom Line

If you don’t want to buy crypto, don’t. Cryptocurrency and blockchain investors have many alternative options to gain portfolio exposure without directly purchasing digital assets. Remember to research thoroughly before investing in cryptocurrency stocks or any investments. Consider which crypto stocks or funds align with your objectives and risk tolerance. You will likely need to accept considerable risk.

Specific companies and funds are mentioned in this article for educational purposes only and not meant as an endorsement.