Bitcoin Stocks: What Are They & Should You Invest in Them?
April 20, 2023
Bitcoin investment options are plentiful today, giving investors a chance to choose the financial instrument that is best suited for their portfolios. Bitcoin stocks have emerged as a particularly popular investment.In this investor guide, you will learn what bitcoin stocks are and discover a list of leading bitcoin stocks to consider adding to your equity portfolio.
What Are Bitcoin Stocks?
Bitcoin stocks are shares in publicly-traded companies that have exposure to Bitcoin (BTC).Types of publicly-traded Bitcoin companies include mining operations, digital asset exchanges, payments companies, and companies with a substantial amount of Bitcoin on their balance sheets.Bitcoin stocks are therefore influenced by the performance of the price of Bitcoin. As a result, investing in Bitcoin stocks is an indirect way of gaining exposure to the performance of Bitcoin, as opposed to buying and holding the cryptocurrency.However, the relationship between Bitcoin’s price performance and Bitcoin stocks, plus the idiosyncratic risks involved in holding a company’s shares, could make Bitcoin stocks a more volatile and risky investment. Additionally, Bitcoin stocks are also affected by equity market drivers, whereas Bitcoin has regular periods of non-correlation with the equity markets.
What Is the Difference Between Bitcoin and Bitcoin Stocks?
Bitcoin is a cryptocurrency that operates on an open, distributed public blockchain network that doesn’t require any intermediary to process transactions. Instead, transactions are verified by network participants using cryptography and recorded on a public ledger, the Bitcoin blockchain.Bitcoin stocks are shares of companies that are involved in the Bitcoin industry or have a high degree of exposure to the Bitcoin market.While Bitcoin trades on digital asset exchanges, such as Binance or Kraken, Bitcoin stocks trade on regulated securities exchanges, such as the New York Stock Exchange or Frankfurt Stock Exchange.The price of Bitcoin can be very volatile as its value is based on supply and investor demand. Factors such as the macroeconomic environment, geopolitical events, regulatory changes, and media coverage affect demand while the total supply remains fixed.Conversely, the prices of Bitcoin stocks are influenced by various idiosyncratic factors, such as the performance of the company or the specific sub-sector of the Bitcoin industry in which it is involved. However, the values of Bitcoin stocks are also driven by equity market trends and investor sentiment toward Bitcoin.
The main difference between Bitcoin and Bitcoin stocks is that Bitcoin is a digital asset, while Bitcoin stocks represent ownership in a company that operates within the Bitcoin sector.
While Bitcoin stocks enable investors to potentially profit from the growth of the Bitcoin ecosystem, they have different characteristics and should be evaluated separately.Here are some characteristics of Bitcoin stocks to consider when evaluating them:
- Business model: Understand the business model of the company and how it generates revenue. Evaluate the potential growth opportunities and risks associated with the Bitcoin company’s business model.
- Market competition: The Bitcoin market is competitive, and companies in this industry can face intense competition. Evaluate the competition and how the company positions itself against its competitors.
- Financials: Evaluate the company's financial records to ascertain how well the business is performing. You can use financial ratios, such as ROE and P/E, to help you assess the company's performance and compare them with their peers.
- Management: The leadership team of a company can greatly impact its success. Evaluate the experience and track record of the management team, as well as any potential conflicts of interest.
- Regulatory environment: The Bitcoin industry is subject to changing regulations and legal uncertainties. Evaluate the regulatory environment in the country where the company operates and any potential risks associated with regulatory changes.
Conversely, Bitcoin only has to contend with (some) market competition from other cryptocurrencies and potential regulatory changes. In that sense, Bitcoin has fewer factors to keep in mind when analyzing it as an investment.
Examples of Bitcoin Stocks
Let’s take a look at some of the leading Bitcoin stocks you will find on stock exchanges across the globe.
Block, Inc. (SQ)
Block, Inc., previously Square, Inc., is a digital payments company launched in 2010 by Jack Dorsey and Jim McKelvey, which trades on NYSE under the ticker symbol SQ. The US company also owns other businesses, including Cash App, Tidal, Afterpay, and Weebly. In 2020, Block spent about $50 million to purchase 4,709 BTC and added another 3,318 BTC the following year for $170 million. Block’s Bitcoin holdings total approximately 8,027.In Q4 2022, Block reported a gross profit of $1.66 billion, a 40% year-over-year (YoY) growth.
Coinbase Global, Inc. (COIN)
Coinbase Global, Inc., founded by Brian Armstrong and Fred Ehrsam in 2012, operates a cryptocurrency exchange where you can buy and sell Bitcoin, among other digital assets. The US company went public as a direct listing on Nasdaq, becoming the first crypto exchange to achieve this milestone. Its ticker symbol is COIN.In Q4/2022, Coinbase reported net revenue of $605 million, a 5% quarter-over-quarter increase. This happened despite the crypto bear market in 2022.
HIVE Blockchain Technologies Ltd. (HIVE)
HIVE Blockchain Technologies Ltd. was the first crypto mining company to go public. The company has been trading on the Toronto Venture Exchange since 2017 under the ticker symbol HIVE. HIVE Blockchain leverages renewable energy to mine Bitcoin, making it a leader in green energy mining. The company’s stock also trades on Nasdaq.In the nine months ending December 31, 2022, HIVE reported revenue of $88.1 million, a 45.4% YoY decline. In light of the 2022 Bitcoin bear market versus the 2021 bull market, the drop in revenue was arguably not unexpected.
Hut 8 Mining Corp. (HUT)
Hut 8 Mining Corp. is another bitcoin mining stock. Established in 2011, the Canadian company mines Bitcoin and provides data center infrastructure and mining equipment repairs for clients. Hut 8’s stock trades on the Toronto Stock Exchange under the ticker symbol HUT.During the year that ended on December 31, 2022, Hut 8’s revenue dropped by $23.1 million to $150.7 million. Bitcoin’s price drop in 2022 contributed to the decrease in revenue.
Marathon Digital Holdings, Inc. (MARA)
Marathon Digital Holdings, Inc. trades on Nasdaq under the ticker symbol MARA. The US company has been in operation since 2010 and engages in sustainable Bitcoin mining.In the year ending December 31, 2022, Marathon recorded a net loss of $686.7 million. The company attributed the loss to a drop in the value of digital assets (the price of Bitcoin dropped around 63% in 2022) and an “impairment charge related to the carrying value of mining rigs and advances to vendors of $332.9 million,” among other factors.
MicroStrategy Inc. (MSTR)
MicroStrategy is a Virginia-based business intelligence company founded by Michael Saylor, Sanju Bansal, and Thomas Spahr in 1989. The public company has been the most prolific corporate buyer of Bitcoin, making headlines with its purchases since 2020. As a result, MicroStrategy is the top public company with the largest Bitcoin holdings, which currently stands at 138,955 BTC.According to its Q4/2022 financial announcement, MicroStrategy generated a revenue of $132.6 million, which marks a decline of 1.5% compared to Q4/2021.
Riot Platforms, Inc. (RIOT)
Riot Platforms, Inc., formerly Riot Blockchain, Inc., is a Bitcoin mining company headquartered in Colorado. The company is listed on NASDAQ with the ticker symbol RIOT. Riot started mining Bitcoin in 2018.2022 full-year results indicate that Riot recorded a total revenue of $259.2 million, which was higher compared to 2021.
Samara Asset Group (SRAG)
Samara Asset Group (SRAG), previously Cryptology Asset Group, invests in emerging asset managers and Bitcoin builders, giving investors access to broad digital asset market exposure. Samara Asset Group was founded by Mike Novogratz and Christian Angermayer’s family office, Apeiron Investment Group, in 2018.The company trades on several German exchanges, such as Börse Düsseldorf, Xetra, Gettex, and Tradegate, under the ticker symbol SRAG. The company generated €4.7 million in profit after tax as of June 30, 2022.
Where & How to Invest in Bitcoin Stocks
You can purchase Bitcoin stocks through traditional online brokerage platforms, like Trade Republic or Flatex, or using your bank’s stock brokerage services.Here are the steps to follow to buy Bitcoin stocks as a retail investor.
Research publicly traded Bitcoin companies
Start by researching public companies involved in the Bitcoin industry, such as payment processors like Square and PayPal, mining companies like Riot Blockchain and Marathon Digital Holdings, or corporate Bitcoin buyers like MicroStrategy.
Choose an online stock broker
Once you have identified Bitcoin companies you would like to invest in, choose an online brokerage account that offers access to Bitcoin companies' stocks. For example, if you are looking to buy Bitcoin mining stocks trading in Canada, you will need a brokerage account that provides you with access to Canadian stock exchanges.
Open a brokerage account
Follow the instructions on your chosen brokerage account's website to open an account. This will typically require providing personal information to complete the customer onboarding process and funding the account using a bank transfer or a card payment.
Place an order to buy shares in a Bitcoin company
Once your brokerage account is funded, place an order to purchase shares in the companies you have researched. Follow the instructions provided by the brokerage account to complete the transaction.
Monitor your investment
Keep track of the companies' performance and monitor the value of your investment. Remember that investing always involves risks and that the value of your investment can go up or down.
When you are investing in Bitcoin, you need to securely store your coins in a personal, non-custodial Bitcoin wallet to which only you hold the private keys. This creates technical hurdles for non-tech-savvy investors. Fortunately, your Bitcoin stocks are held by your brokerage company in segregated accounts with a custodian bank. Therefore, you will not have to worry about storing your assets.
Should You Invest in Bitcoin Stocks?
Bitcoin stocks may be suitable for investors who want exposure to the Bitcoin market without the hassle of buying Bitcoin directly and securely custodying their coins.The technical aspects of securing, buying, and storing Bitcoin can be challenging for the average investor who is used to dealing in stocks and bonds on traditional brokerage platforms.Moreover, Bitcoin stocks have the potential to generate high returns for investors as their prices generally correlate with the price of Bitcoin. So when Bitcoin rallies, Bitcoin stocks tend to shoot up as well. However, that also means that Bitcoin stocks typically experience high price volatility.The decision of whether or not to invest in Bitcoin stocks will depend on your risk appetite and investment goals. So, take your time to properly evaluate the various Bitcoin stocks available in your market before pulling the trigger.
What Stocks Go Up with Bitcoin?
Bitcoin stocks, stocks of companies operating Bitcoin businesses, could benefit when the price of Bitcoin rises. For instance, Bitcoin mining stocks may enjoy an improved performance when the price of Bitcoin is on an uptrend. Stocks of public companies that have added Bitcoin to their balance sheets may also profit from a Bitcoin price rally.
How Has Bitcoin Performed Compared to Top Stocks?
Over the years, Bitcoin has outperformed various leading stocks. Looking at the period from January 2016 to January 2021, Bitcoin's price increased by over 4,000%, while the S&P 500 index increased by about 80%.During the same period, Amazon's stock price increased by about 570%, Apple's stock price increased by about 270%, and Meta's stock price increased by about 220%. In the first quarter of 2023, Bitcoin's performance was better than that of many top stocks yet again.Only Nvidia’s stock has outperformed Bitcoin this year, advancing 87%, while USD/BTC is up 69% year-to-date (as of March 31).
How many Bitcoin stocks are there?
Going by the number of publicly-traded companies that have Bitcoin holdings, including Bitcoin mining companies, there are approximately 30 Bitcoin stocks that are publicly traded.Among the most prominent are MicroStrategy (MSTR) and Coinbase (COIN). Other options include Square (SQ), a payments company that has invested in Bitcoin and allows users to buy and sell BTC, and listed mining companies like Marathon Digital Holdings (MARA), Riot Blockchain (RIOT), or Hut 8 Mining (HUT).
Is owning Bitcoin stock the same as owning Bitcoin?
No. Owning Bitcoin stocks and owning Bitcoin directly are not the same. Bitcoin is a cryptocurrency operating on a public blockchain network, while stocks are issued on traditional databanks and traded on traditional stock exchanges. Bitcoin, on the other hand, can be bought and sold through a crypto exchange.Buying a Bitcoin stock gives you fractional ownership in the company that is behind this stock. However, when you buy Bitcoin, you own the cryptocurrency whose underlying technology is a public blockchain.