Best Bitcoin-Related Stocks to Profit from Rising Bitcoin Prices
Holy smoke! Bitcoin prices have made an incredible new record this weekend. I hear some friends asking me, “I have some money. I want to buy bitcoins. I missed the boat earlier. What do I do?” Well, what if I told you that you still have a chance to get on the next one? Forget Bitcoin for a second and check out some of the best Bitcoin-related stocks that can offer Bitcoin exposure, albeit at lower risk.
I say lower risk because while they can benefit from the uptrend in Bitcoin prices, they can also weather a downtrend because of the diversified nature of their businesses.
Exactly six months ago, I shared my Bitcoin price prediction for 2018 when it had just hit $2,500. I set it at $5,000 for the year, which I must confess seemed, even to me, pretty outlandish at the time. In hindsight, however, I would rate my Bitcoin price forecast as conservative.
Bitcoin prices have just made history. For the first time, BTC prices have crossed the $8,000 mark. Yes, one bitcoin is now selling for more than eight thousand dollars!
If you were lucky enough to buy it at the beginning of this year, you just earned a solid three-digit return, roughly 700%. I’m impressed.
But if you bought it, say, four years ago and held on to it, then I’m bedazzled! Because I’m assuming you may have already become a millionaire.
Who could have thought that this cryptocurrency could garner so much investor interest in such a short span of time?
Regardless, we are here now and the real question to ask is: How far can prices go up from here?
Again, I’m remaining outlandishly conservative. Yes, there’s more upside to Bitcoin. It will continue to climb as its adoption grows. Yet, I cannot ignore the Bitcoin bubble in the making. From where I see it, prices have shot up too high, too fast. So if they tumble, chances are that they will drop in a free fall.
Best Bitcoin Stocks to Watch in 2018
I hate to say it, but the cryptocurrency mania has a feel of the 17th century Dutch Tulip Mania, which didn’t end too well for speculators.
This creates an air of uncertainty in the cryptocurrency world. To counter that, one seemingly promising investment strategy is to invest in Bitcoin stocks—that is, publicly traded companies betting on Bitcoin in some form.
Without further ado, here are my top picks for the best Bitcoin-related stocks for 2018.
|Bitcoin Stocks||Ticker Symbol||Bitcoin Investment|
|Square Inc||NASDAQ:SQ||Integrating Bitcoin as a vehicle of investment with Square Cash|
|Hive Blockchain Technologies||CVE:HIVE||Bitcoin miner|
|Overstock.com, Inc.||NASDAQ:OSTK||Supports Bitcoin as mode of payment. Creating an exchange for ICO companies|
1. Square (SQ) Stock
Mobile payments company Square Inc (NYSE: SQ) is on top of my list of best Bitcoin-based stocks right now. Jack Dorsey’s sideshow is making long strides in the digital payments arena. Yes, he’s the guy often recognized for keeping fancy beards but mostly for running Twitter Inc (NYSE: TWTR).
Dorsey’s efforts to turn the loss-making company around are finally beginning to pay off. Square is beating analyst estimates quarter after quarter and things are finally beginning to look up.
But that’s not what has me excited.
Square has just revealed that it is testing Bitcoin support on the “Square Cash” app. Square Cash, by the way, is Square’s mobile app that lets you digitally send and receive money using your phone without the need to carry a wallet or paper money.
What Square is planning to do now is make Bitcoin purchases easy for Bitcoin bugs. Buying and selling bitcoins may no longer be an arduous process of creating new accounts, downloading wallets, or learning and interpreting Bitcoin jargon. Square plans to allow its users to buy and sell on its platform in a couple of clicks.
In other words, Square is doing more than just having Bitcoin as a mode of payments on its platform. Instead, Square is making it a vehicle of investment by allowing users to trade (a metonym for buying and selling) it.
This is where Square will find an opportunity to act as a middleman and charge fees from Bitcoin investors for, well, simply making their lives easier. I’m assuming that Square may also eventually begin taking the opposite side in some of these trades to make money on arbitrage, just like banking institutions do.
Although it may take some time (read: months or even years) before we see solid money flowing into the company from this bet, rest assured that there’s great potential for Square to benefit off of this nascent industry.
This initiative creates a symbiotic environment for both Bitcoin and Square. On one side, Square profits from new Bitcoin bugs rushing to join its platform. On the other, Bitcoin receives an endorsement from one of the prominent players in the digital payments industry.
If that’s not enough, the fact that Dorsey is himself privately investing in cryptocurrencies should get the bugs excited.
Square’s Bitcoin-related initiative has already sparked a rally in SQ stock prices in the past one week. Overall, SQ stock has shot up more than 230% year-to-date. A comparison of the SQ and BTC price charts shows that the two have begun to move in tandem.
Chart courtesy of TradingView.com
It’s obvious that the market has already picked up on the idea, so investors would certainly want to be keeping tabs on it before it’s too late.
2. HIVE Blockchain Technologies (HIVE) Stock
My next pick may catch you by surprise. That’s because this Bitcoin-related stock began publicly trading just two months ago, which is probably why you may not have heard of it just yet. The stock has already jumped more than 3,000% but considering its future prospects, still appears to be dirt cheap.
It is a relatively lesser known Canadian company that trades on the Canadian exchange—the TSX Venture Exchange. Should you decide to invest in it, you may have to reach out to your broker to discuss the purchase. Nonetheless, this investment idea could be worth it.
Let me explain why. If you want to gain exposure to an upswing in gold prices, you either buy gold or you buy stock in the biggest gold mining companies. Returns on the two move in tandem. The same may be true for Bitcoin.
Now, HIVE Blockchain Technologies Ltd (CVE: HIVE) is a Bitcoin mining company. If you have a fair idea of what Bitcoin mining is, this one-of-its-kind publicly traded company will certainly pique your interest. (You can learn more about mining and other Bitcoin basics here.)
Just a quick refresher: Bitcoin mining simply means solving the complex code that helps unlock bitcoins. As opposed to buying bitcoins off an exchange, you always have the option to mine them if you’re tech savvy and own a heavy-duty, super-fast PC. By the latter, I mean a PC that’s running a high-speed processor under its hood and won’t go up in smoke.
Bitcoin mining, like gold mining, is very capital intensive. The computer processor constantly running the code takes up a lot of power and thus heats up fast.
HIVE identifies that the biggest costs in Bitcoin mining are that of electricity and hardware. And this is where HIVE takes the lead over mom-and-pop miners.
The company employs the economic concept of “economies of scale” to mine bitcoins. It has moved its mining operations to Iceland, where electricity costs are cheap and temperatures are cool. The hardware at its data centers has support from the world’s largest Bitcoin mining company, giving HIVE a clean edge over smaller competitors.
HIVE Blockchain Technologies is co-founded and majority owned by the world’s biggest Bitcoin miner, Genesis Mining Ltd.
The company sets itself apart from others in the mining business by having the first-mover advantage and by being a cash flow positive company that has already secured roughly $100.0 million in funding in recent months to finance its operations.
In fact, if you take a look at its price chart, you can see that its year-to-date performance (in blue) far surpasses that of Bitcoin’s.
Chart courtesy of TradingView.com
Currently selling for a little under $4.00 apiece, HIVE stock is one Bitcoin-related penny stock that deserves to be on your radar.
3. Overstock (OSTK) Stock
On to my last pick for the best Bitcoin-related stocks for 2018 now. This one is yet another interesting company. Overstock.com Inc (NASDAQ: OSTK) is a renowned “e-tailer” that begs no introduction. However, it’s on this list for being the first major retail company to accept Bitcoin as a mode of payment.
Overstock allows buyers to make their online purchases, ranging from furniture to bedding to jewelry, using bitcoins. In fact, Bitcoin is not the only cryptocurrency it accepts. The retailer supports about 40 other altcoins on its e-commerce platform.
Overstock CEO Patrick Byrne, who’s both a gold and Bitcoin bug, believes that BTC could eventually be more powerful than fiat currency. Byrne saw demand for the cryptocurrency growing and right away put his money where his mouth was.
According to Byrne, an average of $50,000 worth of transactions are already being conducted on the Overstock platform using bitcoins, which, although modest, validate that Bitcoin is gaining acceptance as an alternative to fiat currency.
But again, there’s more than just his exuberance for the cryptocurrency that makes me optimistic about this stock.
One good reason why I’m pitching OSTK stock is “tZERO”—a trading platform for ICO companies owned by Overstock.
In case you are unaware, ICO is an acronym for Initial Coin Offering, the cryptocurrency-based equivalent of Initial Public Offering (IPO). ICO companies bypass the capital markets to raise money through bitcoins or other cryptocurrencies.
Overstock’s tZERO has emerged as a secondary market for these companies, providing them with a platform where their securities can trade.
The trading platform, which complies with the SEC’s regulations, has been registered as an “Alternative Trading System,” where stocks of ICO companies backed by any cryptocurrency can trade.
What tZERO promises is a cheaper and more profitable alternative to the traditional stock market, where investors can build their wealth through cryptocurrencies. The trading platform is still in the works and goes live later this year.
Overstock’s Bitcoin-based initiatives have granted it a special place in the investing community. Bitcoin bugs seeking investments are seemingly pouring their money into it.
Overstock’s stock performance in the past three months, while Byrne was working on these initiatives, has been a near-perfect reflection of BTC price performance.
Chart courtesy of TradingView.com
So, with Bitcoin prices continuing to trend upward, chances are that Overstock stock will be following suit.
Bitcoin prices have hit giddying heights and it’s natural for investors to feel nervous. At this point, a good way to achieve some peace of mind may be to invest in some of the best Bitcoin-related stocks for 2018, which could help diversify part of the risk that comes with these sky-high Bitcoin prices.
Square, HIVE, and Overstock all have recently undertaken new Bitcoin-based initiatives that spell good fortune for them in the coming year. Needless to say, my take on these three companies is nothing but bullish.