Cryptocurrencies are booming as we turn the calendar over into 2021. Three of the four largest cryptocurrency tokens posted massive gains last year, driving the industry's total market value to $860 billion on January 4, according to data from Coinmarketcap.com. Bitcoin has returned 38% so far this year. Ethereum has returned 67%. This is coming on the heels of 250% and 356% returns last year.
The once-reviled asset class is gaining respect and interest from governments and financial giants around the world. Fidelity has added a crypto unit to serve its clients, which include hedge funds and family offices. Van Eck has filed for the launch of a Bitcoin ETF, while JP Morgan is has created a blockchain unit.
Despite bitcoin’s gravity-defying run, many analysts are still bullish on the digital asset in the long term. Earlier in the week, JP Morgan, in a rare event, predicted that bitcoin could surge as high as $146,000. In the same vein, Morgan Stanley increased its stake in bitcoin-laden MicroStrategy by adding 650,000 shares.
Crypto stocks are equally tracking the performance of cryptocurrencies and have posted impressive gains this year already. On a year-to-date basis, shares of Grayscale (GBTC) has risen 38%, RIOT has returned 56.5%, while shares of MARA have surged 152 %.
Against this backdrop, it would make sense to add some crypto stocks to your portfolio, especially if you do not want to own the digital coin directly. However, there are certain metrics you should be on the lookout for when hunting cryptocurrency stocks. These are listed below.
Miners
These companies are direct bets on the machinery behind the scenes. You are investing in the technology behind the creation of cryptos. Though anybody can mine, the operating costs make it difficult for individuals to break even. This is primarily due to the large equipment and electricity costs associated with the activity. plus, when prices are down, mining is unprofitable for individual miners and small mining farms
Cryptocurrency mining companies bring down their fixed costs by purchasing equipment in bulk and operating at scale to save on electricity costs. These tactics enable them to weather losses during price slumps.
Crypto mining companies such as Bit Digital (NASDAQ: BTBT), Riot Blockchain (NASDAQ: RIOT), and Marathon Patent Group (NASDAQ: MARA) have the potential to outgrow bitcoin and Ethereum tokens if they continually improve on their mining capacity and optimize their networks.
Crypto mining stocks are good bets, especially when you look at their returns last year, which make bitcoin's 308% return look meager. Because they closely track and replicate the performance of cyrtos, these types of stocks are volatile.
Companies with large bitcoin investments
Several publicly traded companies have decided to divest some or all of their cash reserves in bitcoin tokens. Business intelligence company MicroStrategy (NASDAQ: MSTR) is the leader in this category. The company, which has notable investors such as Morgan Stanley, has converted its entire cash reserve to bitcoin. The company held 70,470 bitcoin tokens as of December 21.
Digital payment platform Square (NYSE: SQ) is also another company that has invested a substantial amount in bitcoin. The company invested $50 million in bitcoin tokens last October, a more cautious approach to that of MicroStrategy considering Square's total cash equivalents, which stood at $2.9 billion at the end of September.
Stocks in these companies are less volatile than crypto mining stocks. These companies have substantial business assets and operations with no direct ties to the crypto market, which could come in handy if bitcoin prices come back down again.
Financial disruptors
These are companies that are taking an innovative approach to financing, which includes embracing the rising tide of cryptocurrencies. Companies such as Mastercard, Visa, and PayPal are offering their customers the option of sending and receiving crypto payments. MasterCard (NYSE: MA) filed for dozens of blockchain and cryptocurrency patents in recent years in a bid to position itself against future demand.
These companies are the least volatile of the three categories. Fundamentals determine these classes' price action rather than the performance of bitcoin or other cryptocurrencies. As such, it would be best to track the news of these companies and keep an eye for management comments, especially regarding their approach to the crypto market.
Thanks for reading!
Checkout bullticker's page for more.
No comments:
Post a Comment