Cryptocurrency stocks to watch in 2021
Bitcoin volatility is taking the trading world by storm. These 7 stocks will give you early exposure to the new asset class.
Bitcoin has gone mainstream, with retail and institutional investors clamouring for a piece of the action. Following on from that success, markets are looking for ways to gain exposure to the nascent asset class.
While you can buy cryptocurrencies directly, another option is to invest in the companies that are helping to shape the future of the industry. But the blockchain industry is always evolving, which can make it tricky to find the simplest way to diversify into digital assets.
So what are some of the best companies and crypto-related sectors to whet the appetite for Bitcoin stocks?
Companies with digital assets exposure
In the seven stocks selected here you'll find a mix of several contributing sectors of the cryptocurrency ecosystem. There are cryptocurrency mining stocks, cryptocurrency financial services stocks along with a cryptocurrency investments firm Grayscale Bitcoin Trust (OTC: GBTC) and a "crypto native" venture capital company Galaxy Digital (TSX: GLXY).
This list is not exhaustive by any means and could very easily include the likes of well-established technology companies such as IBM (NYSE: IBM), Microsoft (NASDAQ: MSFT) and many more. Firms like those are already involved in blockchain technology using their financial power to purchase blockchain startups and assimilate those products into their already mammoth service offerings.
Another stock with exposure to Bitcoin is Microstrategy (NASDAQ:MSTR) whose savvy Bitcoin treasury investments have seen its equity rise over 200% year-on-year. Meanwhile, the Coinbase cryptocurrency exchange is a private company that should be watched for a future IPO in this space.
Recent changes to US regulations have allowed financial institutions greater freedom to operate within the market for digital assets. Two of the early movers have been PayPal and Square. With a debt-to-equity ratio of 1:48, PayPal is well positioned to profit from a transition to cryptocurrency payments in the years and decades ahead.
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Crypto mining exposure
There's only one cryptocurrency mining company on the list. In terms of mining productivity, Marathon is six times smaller than the United States' largest Bitcoin miner, Core Scientific, and yet Core Scientific is still a private company.
The trend is clear, Bitcoin mining profitability exists in the long term. For that reason, chip makers will be hugely important to the developing cryptocurrency mining industry. In this list, Nvidia (NASDAQ: NVDA) appears where a handful of others could have. One notable company that has been overlooked is Advanced Micro Devices (NASDAQ: AMD).
AMD produces very efficient chips with higher processing rates at a lower cost than most semiconductor manufacturers. For that reason AMD may be more competitive than other brands looking years into the future. This could lead to a larger market share in the crypto mining industry and in the computing industry more broadly for AMD.
To round out the seven, Enphase (NASDAQ: ENPH) has been added to the list. At first, it might seem strange to have a renewables technology manufacturer in the list for cryptocurrency stocks. What is important to keep in mind is the huge amount of power that goes into mining cryptocurrency.
In addition to that, solar energy is becoming more and more efficient. The costs of crypto mining will be pushed down significantly by improvements in solar technology. Looking into the years and decades ahead, Enphase products will have a massive impact on cryptocurrency markets.
Even looking backwards, Enphase was one of only a handful of mid-to-large cap stocks that outperformed Bitcoin in the year 2020. Going forward, its technology will be applied to crypto mining more and more, not less.
Bitcoin stocks for 2021
|1. Grayscale Bitcoin Trust (OTC:GBTC)||5. Nvidia (NASDAQ: NVDA)|
|2. Galaxy Digital (TSX: GLXY)||6. Marathon Patent Group (NASDAQ: MARA)|
|3. PayPal (NASDAQ: PYPL)||7. Enphase Energy INC (NASDAQ: ENPH)|
|4. Square (NYSE: SQ)|
- 1 year performance (to 25 January): 705.88%
- Market cap: US$879.3 million
- Date founded: 2006
- Galaxy Digital has been something of a pioneer operating as a venture capital firm in the crypto space. The company ran at a US$175 million deficit in the year 2020 and still managed to increase its equity by over 700%.
- 1 year performance (to 25 January): 119.36%
- Market cap: US$331 billion
- Date founded: 1993
- Nvidia is best known for producing graphics cards (GPU) for the video game industry. Since the computing power required for Bitcoin skyrocketed, platforms like Ethereum have designed their algorithms so that GPUs can be used to mine cryptocurrency.
How to gain exposure in crypto-related assets
To buy stocks that will give you exposure to the cryptocurrency market you’ll need access to a brokerage account offering international share trading. Be aware that not all online brokers in Australia offer access to trading on international stock exchanges.
Many stocks, such as those mentioned above, that are set to benefit from the rise of digital currencies are listed in the United States. To access US-listed companies, you'll need to sign up to a broker with access to NASDAQ and the NYSE, such as eToro.
It’s important to understand the fee structure for any brokerage account because some brokerage fees can be high.
Once you’ve decided on which share trading platform is right for you, search for the name of your preferred stock or its stock code. Some platforms offer extra data and information on the stock such as broker rating, price targets, dividend payments and debt-to-value ratio.
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