Crypto Stocks Explained – Forbes Advisor Australia

Investing in the cryptocurrency market through stocks offers a wide range of options to suit different investment preferences and risk tolerances. These options can be broadly categorized into exchange-traded funds (ETFs), crypto industry stocks, and crypto-adjacent stocks.

Exchange Traded Fund (ETF)

Cryptocurrency ETFs have become a hot topic for investors seeking exposure to digital currencies without the complexity of direct ownership. The Securities and Exchange Commission (SEC) recently approved 11 spot crypto ETFs, including one managed by BlackRock, the world’s largest asset manager, to trade on US exchanges, a significant milestone for the digital asset space. It became. These spot ETFs directly reflect the current market prices of cryptocurrencies and offer an easy approach to investing in the digital currency market.

There are also futures ETFs, which have been available in the US and Australia for some time and are based on virtual currency futures contracts. These contracts speculate on future prices rather than providing direct exposure to current market prices in real time. The main difference lies in the directness of the exposure to cryptocurrencies. Spot ETFs reflect market movements more immediately, while futures ETFs involve some degree of speculation about future prices. This difference is important for an investor to understand before choosing which type of ETF to invest in.

Examples of crypto ETFs include:

• Global X 21Shares Bitcoin ETF (EBTC, CXA): Track Bitcoin holdings held by Coinbase in Australian Dollars and track Bitcoin prices. Global X also has a similar Spot Ethereum ETF under the ticker EETH.
• iSHARES Bitcoin Trust (IBIT, NASDAQ): The most famous spot Bitcoin ETF managed by BlackRock.

crypto industry stocks

Companies that fall into the cryptocurrency industry stocks category are those whose main business operations are related to the world of cryptocurrencies. This includes listed cryptocurrency exchanges, platforms where users can buy, sell, and trade cryptocurrencies. These exchanges are central to the liquidity and accessibility of the cryptocurrency market.

Another important part of this category are crypto mining companies. Mining is essential to maintaining the blockchain, and miners receive payments in cryptocurrencies for their services. These companies play a vital role in the functioning and growth of the ecosystem, providing the computing power needed to process transactions and secure the network.

Examples of crypto industry stocks include:

• Coinbase (COIN, NASDAQ): It is one of the world’s largest cryptocurrency exchanges, serving millions of retail and institutional customers around the world. The company is listed on the NASDAQ, which has many high-tech stocks.
• Marathon Digital (MARA, NASDAQ): A major Bitcoin mining company listed on NASDAQ.

Virtual currency adjacent stocks

Cryptocurrency stocks represent companies that are not primarily focused on cryptocurrencies, but have significant efforts and investments in this space.

This includes companies in the technology sector, such as graphics processing unit (GPU) manufacturers, whose products are critical to the infrastructure of cryptocurrency mining and blockchain technology itself. Additionally, some companies, despite their broader business focus, choose to hold large amounts of cryptocurrencies on their balance sheets or integrate crypto-related services into their products. . These investments and services are linked to movements in the cryptocurrency market, and their share price performance often rises and falls with broader cryptocurrency trends.

Examples of virtual currency-adjacent stocks include:

• MicroStrategy Inc. (MSTR, NASDAQ): It holds a large amount of Bitcoin on its balance sheet, providing indirect exposure to Bitcoin price movements.
• Nvidia (NVDA, NASDAQ): Benefiting from the wave of cryptocurrency adoption, we supply GPUs and chips essential for cryptocurrency mining.
• PayPal (PYPL, NASDAQ): Integrate cryptocurrency trading into payment platforms and Venmo, connecting traditional finance and cryptocurrency markets.

Each category of crypto stocks has a different degree of exposure to market volatility and growth potential, and offers a different entry point into the digital currency space. Understanding these differences is important for investors looking to align their portfolios with their investment objectives and risk appetite in the rapidly evolving crypto sector.