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How to invest in Bitcoin without buying Bitcoin

Fortune
Fortune
 2021-10-15
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With Bitcoin once again topping $60,000, many onetime skeptics are becoming increasingly curious about the investment potential of crypocurrencies.

If risking money directly on Bitcoin is still too intimidating, there are plenty of other options among companies that follow more traditional business models but still have strong crypto interests.

Here are a few to consider if you’re thinking of dipping your toes in the water:

Hut 8 Mining Corp

One of several North American Bitcoin mining companies that have been gaining market share in recent months after China banned mining. D.A. Davidson analyst Christopher Brendler says Hut 8 and other mining companies, including Core Scientific, Marathon Digital, and Riot Blockchain, are “literally printing money.” Hut 8 shares have soared 292% this year (and Marathon Digital shares are up 320%).

Coinbase

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One of the most popular places for people to buy and sell cryptocurrencies, Coinbase has seen its shares dip since its IPO in mid-April, falling 18% year to date, but they have been on the rise this month. Beyond the revenue it earns from trades, Coinbase also holds significant crypto assets itself. In August it announced plans to buy $500 million in cryptocurrency and invest 10% of all future profits into digital assets. Coinbase brought in $2.23 billion in total revenue during the second quarter ended June 30, a huge leap from the $186 million earned in the same period last year.

MicroStrategy

Few companies have bet bigger on Bitcoin than MicroStrategy. The company, as of June 21, held 105,085 Bitcoin. MicroStrategy paid, on average $37,617 each for those, it says, giving it a hefty profit. The company has regularly praised the cryptocurrency as a “dependable store of value supported by a robust, public, open-source architecture untethered to sovereign monetary policy.” Year to date, MicroStrategy stock is up 76%.

Tesla

Elon Musk, in many ways, gave Bitcoin a turbo-boost when his electric-car manufacturer began buying the crypto in February. To date, Tesla’s Bitcoin holdings have produced (paper) returns of $1 billion. The company holds roughly 43,200 BTC. And Musk says the company will “most likely” start accepting Bitcoin again, after it reviews renewable energy usage. Tesla shares are up 14% year to date.

Blockchain ETFs

If you would rather not bet on a single company, there are several exchange-traded funds that have a blockchain focus. Leading examples include:

Amplify Transformational Data Sharing ETF (BLOK)

The largest blockchain ETF by total assets with holdings including PayPal, MicroStrategy, and Square. It’s up 42% year to date.

Siren Nasdaq NexGen Economy ETF (BLCN)

Holdings include Coinbase, Accenture, and Square. So far this year, it has seen a 15% increase in value.

First Trust Indxx Innovative Transaction & Process ETF (LEGR)

Top holdings are Nvidia, Oracle, and Fujitsu, and year-to-date gains have topped 17%.

Crypto ETFs (likely in the near future)

This is, in part, what’s driving the current Bitcoin rush. Several companies have filed the paperwork to launch a Bitcoin ETF. None have been approved yet, but Bloomberg reports the Securities and Exchange Commission is likely to sign off on the first one soon, and trading could begin as early as next week.

If you can’t wait that long, the Grayscale Bitcoin Trust has sidestepped the SEC and trades over the counter under the symbol GBTC. (It’s up 33% this year.) Note, though, that it carried annual fees of 2%, which has turned off some investors.

Canadian Bitcoin ETFs

While U.S. officials have moved slowly when it comes to Bitcoin ETFs, Canada has embraced the investment vehicle. The largest is Purpose Bitcoin ETF, with more than $12 billion under management. Earlier this month, it announced the launch of mutual fund units. The ETF is up 11% year to date since launching in February.

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