Just a few short years ago, buying up cryptocurrency was all the rage. In theory, you could spend a little on Bitcoin or one of the other popular cryptocurrencies, and cash out with an astonishing rate of return.
But as you might have noticed, Bitcoin and some of its contemporaries are now in the post-hype stage, as Jay Caspian Kang of Coin Talk has previously pointed out. Crypto is no longer a viable get-rich-quick scheme (I mean, was it ever?), and experts caution against it if you’re seeking short-term gains.
But perhaps you’re still interested in how cryptocurrency is developing, and you want to diversify your investment portfolio a bit. Instead of buying up some whatever-coin, you could invest in cryptocurrency via stocks. Logistically, it’s a heck of a lot easier than remembering your access key and securely storing your digital currency. It’s potentially less risky. But should you do it?
The stock market is still risky by design, but if you’re reading this and have even just a retirement savings account, you’re probably already playing the game. Cryptocurrency stocks may be an option for investing in this new technology without touching the end product.
The Wall Street Journal recently cited Overstock.com Inc., Nvidia Corp., and Hut 8 Mining Corp. as popular cryptocurrency stocks in the U.S. market. These companies usually don’t issue their own cryptocurrency like Bitcoin or Ethereum. Instead, they focus on developing blockchain technology, which powers cryptocurrency transactions.
But the paper also points out that there’s still a lot of volatility. Crypto-related stocks dropped after the crypto bubble burst in 2018, and while Overstock.com and Hut 8 Mining have stabilised, they’re trending far from that former peak performance.
As far as their involvement in the crypto game, Overstock, for example, is an ecommerce retailer. It also runs a blockchain subsidiary called tZero, and plans to release its own currency by that name next year. Other players in cryptocurrency are well known names on stock tickers: Microsoft, Visa, PayPal, and Goldman Sachs are on Yahoo! Finance’s list of “top crypto bets.”
“Just because the company primarily focuses on crypto and blockchain doesn’t mean it can’t have other lines of business or even be in other segments of the crypto value chain to diversify the business risk of solely operating within a limited number of cryptocurrencies,” said Riley Adams, a CPA who blogs at Young and The Invested.
Basically, just as you want to diversify your investment portfolio to reduce the risk that one bad stock buy will wipe out your gains, businesses also want to reduce their risk by diversifying how they invest money within their own company. By focusing on the technology behind the specific currencies, Adams said, “it dramatically reduces the risk of any one currency going bust after heavily investing in it.”
Adams advised checking out companies who are working on payment facilitation or blockchain infrastructure in your country, rather than those who are focusing on one specific type of cryptocurrency.