InsideBitcoins.com

How to Invest in Bitcoin Stocks in 2020

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Author: John Ladeluca

Most cryptocurrencies are considered ‘assets’ with value, meaning they can be bought or sold for a certain price in the market; however, the regulatory stature behind them is fairly unclear, leaving many investors and traders wanting to get involved with Bitcoin and other cryptos, but not being entirely confident in doing so. As a result, luckily, users can buy certain stocks on the publicly regulated and overseen stock markets that offer them exposure to Bitcoin’s development and progress.

These stocks are not exactly representative of ‘Bitcoin’, or a cryptocurrency themselves, however, their price action and growth is highly correlated to the same of Bitcoin, cryptocurrency, or blockchain development as a whole. As a result, these stocks are dubbed ‘Bitcoin stocks’. This guide will overview the basics of Bitcoin stocks and will teach users how to buy Bitcoin stocks in 2019. Certain regulated brokers enable the trading and underlying asset buying of multiple types of Bitcoin stocks.

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    What are Bitcoin stocks?

    Prior to learning how to buy Bitcoin stocks, it's important to define exactly what is meant by the term Bitcoin stocks: In our classification, Bitcoin stocks are legally registered and compliant equities or 'stocks' on the public regulated markets that are highly correlated and in an indirect way, representative of Bitcoin, cryptocurrency, or blockchain's growth. Bitcoin stocks are bought from regulated brokers, which means it's different from buying Bitcoin, and you do not need a Bitcoin wallet. Additionally, Bitcoin stocks are never held by the buyers themselves, rather by third-party brokers who hold the actual valuations of these stocks.

    Bitcoin stocks are rather a generalized term and aren't special to just a certain type of class or asset type. Also, keep in mind, these stocks themselves are not representative of Bitcoin, and although they might be correlated to the progress and development of tech like Bitcoin, we do not in any way guarantee that these stocks will 1.) Ever be successful, 2.) Are demonstrative of how Bitcoin performs, or 3.) Are actually 'Bitcoin stocks' - in all cases, Bitcoin stock is a term used amongst the community but is not a legally acknowledged or registered term.

    In many cases, these Bitcoin stocks will be new companies, with limited background, which may be deemed as penny stocks - in all of these types of cases, we highly suggest you complete the proper amount of due diligence, and proceed with caution as these are highly volatile, unpredictable assets. Also, while there is no singular centralized type of stock that represents Bitcoin, we recommend alternative regulated methods of buying Bitcoin, such as by using regulated registered brokers like  Coinbase as a close alternative.

    Buy Bitcoin Stocks and Sell Bitcoin Stocks in Your Country

    UKUS and Canada

    Within the U.K., you can legally buy Bitcoin stocks in an entirely compliant and regulated manner on eToro, and you can trade them as CFDs with brokers like Plus500. The main difference between buying Bitcoin stocks on either of these platforms is that you can buy the underlying stock in its actualized value on eToro, whereas when it comes to Plus500, you can only buy and sell CFDs of the same Bitcoin stocks.

    In either case, buying Bitcoin stocks in the U.K. is definitely possible and feasible. Plus500 allows you to trade stocks and assets listed on the London Stock Exchange in the form of CFDs, so the ability to either buy or sell Bitcoin stocks as CFDs is really dependent upon your own selection of these stocks.

    If you're in the U.S. or Canada, which are amongst two of the largest communities for cryptocurrencies and digital market-type technologies, you'll be happy to know that both are supported and enabled for users to buy Bitcoin stocks and sell Bitcoin stocks in. Canadian markets and subsequently Canadian listed 'Bitcoin stocks' are not enabled, however, Canadians are absolutely allowed to access U.S. and U.K.-focused Bitcoin stocks. As long as the proper protocols are adhered to, there should be no issues.

    Bitcoin stocks are mainly focused on U.S. markets, however, Canadians are just as equally allowed to access them, meaning buy, sell, or trade them in the fashion of their choice.

    Tips on Buying a Bitcoin Stock

    Check the actual company

    Many times what can be considered 'Bitcoin stocks' are just attempts at using the brand names of 'Bitcoin', 'crypto', or 'blockchain' to try and capture speculation; as a result, ensure that you check and analyze the actual underlying company. We recommend going through the company's financials, assessing whether or not its fundamental business base would be sustainable regardless of whether or not Bitcoin succeeds or not, etc. These are factors that will compose the underlying asset/stock in question, and as a general rule of thumb, we do highly recommend that you actually research and perform the proper due diligence for the company in question instead of disregarding its fundamentals and buying it based upon pure association to cryptocurrency. In the case of bullish Bitcoin/crypto movements, if the foundation and infrastructure of the stock in question are not reliable, we can't be entirely confident of its long-term performance.

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    Steer away for irrational speculation

    In 2017, a tea company changed its stock asset listing to include the keyword 'Blockchain' in its company title, and as a result, the price of the stock increased nearly 10-fold but shortly crashed afterward- the moral of the story is to try to stay away from pure speculation in Bitcoin stocks.

    The above company is just one of many examples where speculation took control of the Bitcoin stock in question and left many hopeful investors with bags of worthless stock in a company they truly didn't believe in. We recommend when buying certain Bitcoin stocks, whether Bitcoin or blockchain-associated, that you try to separate pure analysis from speculative notions. This is what separates long-term winners from short-term duds in Bitcoin stocks.

    Form Your Own Conclusions

    Do your due diligence on the Bitcoin stock in question. Reading one singular analysis report on a prospective Bitcoin report is not always sufficient enough to make a successful play with Bitcoin stocks. Try to do your own research and form your own conclusions. If an analyst on the news says one Bitcoin stock is about to explode in terms of price, try to look at why they might truly believe a notion like that. Try to be unbiased, and look at statistical based information on a prospective Bitcoin stock you're looking at buying.

    Bitcoin stocks vs Bitcoin

    There are a few reasons why Bitcoin stocks would want to be chosen over buying the underlying Bitcoin asset itself. These reasons range from regulatory parameters to jurisdictional enabling, and more.  Let's review a few of the main factors in our comparison between Bitcoin stocks and Bitcoin itself as an asset.

    Similarities

    • Bitcoin stocks and Bitcoin as an asset itself are both assets of value that can be purchased and exchanged
    • Both can be bought and sold on open markets ran by brokers
    • Bitcoin stocks and Bitcoin are both tradeable, can be bought with margin, and can be traded
    • Both are subject to volatile price swings that are apparent with cryptocurrency-related assets

    Differences

    • Bitcoin stock has to be held with a broker or exchange, Bitcoin itself can be bought owned outright, and used for multiple purposes
    • ‘Bitcoin stocks’ are not as correlated to cryptocurrencies as pure Bitcoin itself is
    • You can use Bitcoin for payments, Bitcoin stock cannot be used for payments
    • Bitcoin is legally acknowledged but not registered, Bitcoin stocks have to be registered with proper authorities and exchanges
    • Bitcoin stocks are representational values held by ‘brokers’, Bitcoin itself is a cryptographically ensured digital form of ‘value’ held by no central party

    Are Bitcoin stocks better than Bitcoin?

    Assessing whether Bitcoin stocks are better than Bitcoin or vice-versa is very subjective and depends on your investor status, purpose in buying, and investment goals.

    Bitcoin stocks are in some cases better than Bitcoin in the same way that sometimes Bitcoin is better than Bitcoin stocks. Let's assess when this becomes apparent; if you're looking to invest in Bitcoin assets that are highly correlated to how Bitcoin performs without buying Bitcoin itself, then Bitcoin stocks are an ideal option. If you're looking to buy direct access to the volatility and pure market movement of cryptocurrency, then buying Bitcoin itself would be a better option.

    Bitcoin stocks are not necessarily better than Bitcoin in any explicit way, they are simply an alternative avenue if you wish to get exposure to Bitcoin but can't buy Bitcoin itself. For example, some financial institutions want to buy assets like Bitcoin but are not allowed to, as a result, they can buy Bitcoin stocks which are highly correlated to the price of Bitcoin.

    Main Reasons to Buy Bitcoin Stocks

    RegulationComfortWide Availability (Mobile)Margin AvailabilityFund Safety

    Many users, institutions, and companies are not allowed to buy Bitcoin it is not financially registered or finitely regulated in specific jurisdictions. As a result, these same people can buy Bitcoin stocks, which is a way to expose capital to the potential benefits that Bitcoin stocks can offer without having to explicitly buy or engage in unregulated or unlicensed markets.

    Many users who want to get involved with Bitcoin or relative blockchain technology investments are uncomfortable in doing so because they don't understand the nature of cryptocurrency. As a result, Bitcoin stocks offer an option for these select category of investors to get started immediately in a compliant, safe way.

    Bitcoin stocks are available for trading, buying, and selling, on a very wide number of platforms, exchanges, brokers, and much more. For this reason, Bitcoin stocks can be purchased and accessed on multiple outlets, either from a mobile application, desktop platform, and much more.

    There are some investors as well as traders that are unable to use market opportunities such as margin and similar tools in their trading or purchases, so as a result, Bitcoin stocks can serve as an outlet to access cryptocurrency prices, margin, and the like all while staying within a regulated and well-known registered brokerage environment that Bitcoin itself does not offer.

    One of the largest benefits that Bitcoin stocks offer that buying Bitcoin outright does not offer funds safety and insurance. You can expose capital to the price offerings of Bitcoin while all the while being insured since the capital is in a federally regulated stock/equity. The brokerage more than likely offers stock/equity protection as well.

     

    FAQs

    What's the main difference between Bitcoin stocks and Bitcoin?

    In terms of one finite conclusion, Bitcoin itself is an unregulated, unregistered currency that can be used for transactional purposes while Bitcoin stock is registered, regulated forms of value in companies that are correlated to Bitcoin and cryptocurrency.

    Are Bitcoin stocks pretty much identical to Bitcoin?

    Unfortunately, Bitcoin stocks are not exactly like Bitcoin; although these stocks are correlated to Bitcoin, they are not like 'regulated forms' of purchase in crypto. Rather it's just a share of a company that is closely correlated to the development and price action of crypto and Bitcoin.

    What constitutes a 'Bitcoin stock'?

    A Bitcoin stock is generalized as a share in a company that is either adopting cryptocurrency/Bitcoin in a major forefront way or is very highly correlated to the price action of Bitcoin.

    Where do I buy Bitcoin stocks?

    You can buy Bitcoin stocks on any platform that offers registered, compliant buying and selling of public stock markets (Either U.S. or England markets, which are the two main outlets for Bitcoin stocks).

    Can I use Bitcoin stocks for payments?

    No, Bitcoin stocks are still stocks, Bitcoin itself can be used for payments, however.

    Can I exchange Bitcoin stock for Bitcoin?

    If you use eToro, you can sell Bitcoin stocks and buy Bitcoin as CFDs directly on the same platform.

    What is the best Bitcoin stock?

    There's really no singular answer for which Bitcoin stock is the best - IBM is commonly referred to as the largest 'Bitcoin' stock because it's integrating blockchain for its main underlying infrastructure. However, the answer to this question is dependent on your own interpretation and analysis.

    Remember, all trading carries risk. Past performance is no guarantee of future results.
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    John Iadeluca is the founder of the Wall Street hedge fund Banz Capital. He's a blockchain developer, quant, and consultant that specializes in the digital asset sector. He is an authority on blockchain and has written for a number of publications including Forbes.com.