As of this March, there were 18,465 cryptocurrencies. Compare that to the 2,009 listed companies on the London Stock Exchange (LSE), and youâre looking at a much deeper pool.
The big reason behind this is regulation. While the UK stock exchange is a regulated market, the world of crypto is not. Thereâs essentially no barrier to entry for new cryptocurrencies to become investable assets.Â
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Regulation is the biggest difference between cryptocurrency and cryptocurrency stocks.Â
There is no central authority controlling the supply of cryptocurrency. And any transaction using the blockchain can be done without third-party involvement.
Anyone can create a cryptocurrency. The only commitment required of a crypto creator is a fair bit of time, and perhaps a bit of money.Â
Publicly traded companies, on the other hand, live in a different world. Theyâre regulated entities which have to apply to a stock market for admission to trade.Â
In the UK for instance, companies have to go through a few stages to list on the LSE Main Market. A biggie is issuing a prospectus, which is a document chock full of information about the company and its finances.Â
If a company is accepted onto the Main Market, the rules donât stop and theyâll need to keep complying with a whole host of criteria. Theyâll also need to issue continual updates for shareholders, either on a quarterly or semi-annual basis.Â
No cryptocurrency has any obligation to provide you, the investor, with any information whatsoever. And frankly, given the currencies donât generate money per se, there wouldnât be too much to share aside from changes in supply or demand.
Thatâs something to be hyper vigilant of as an investor. And also, the fact that if a crypto trading platform goes out of business, you wonât be able to recover your funds.
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Investing in a crypto stock isnât a hedged investment in crypto. While the price of a cryptocurrency is impacted by the supply and demand of the coin, the share price of a crypto miner is impacted by plenty more factors.
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Cryptocurrency held in an account isnât protected by a government or legislative body. If your crypto wallet gets hacked, the UK government wonât step in to lend a helping hand. This is one major difference between crypto and stocks.
If you bought shares in a company that went into administration, you may be entitled to any money given to shareholders in the administration process.Â
And if your stock broker goes insolvent, your assets would either be returned to you as cash or transferred to another broker. The Financial Services Compensation Scheme (FSCS) covers investments up to ÂŁ85,000 per person, per firm.
Something else to note is that crypto invites speculation when it isnât being used as a currency. But stocks represent real companies with earnings, revenue, and hopefully profits. All of which can be quantified and tied to the economic cycle. That means theyâre worthy of analysis, youâre not just reading tea leaves.Â
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There might be a place for alternative assets like crypto in your portfolio, or your desired risk and return level might mean thereâs not. They definitely arenât one and the same, and crypto commands a lot more risk appetite.
Thatâs really important to emphasise here.
Like all of our investment decisions, this question is personal. But itâs not an apples to apples comparison when it comes to the two.Â
You can think of an investment in crypto similarly to one in commodities. Weâre not calling crypto a commodity, weâre just saying investors might be interested in holding it since itâs an alternative to stocks, Investors hold alternative assets, like gold, because they are different to stocks. Not because theyâre the same.Â
An investment in crypto will give you exposure to the price of a cryptocurrency, nothing more nothing less. A crypto stock, letâs say a crypto miner or platform, is a business.Â
So while crypto stocks are of course connected to the price and success of a cryptocurrency, other factors will impact the firmâs performance too.Â
Because of their regulated nature, exchange-listed crypto stocks can offer investors more protection if things go awry. But there is currently no protection for cryptocurrencies in the UK.Â
Understanding the different risks is vital to your decision of whether investing in crypto, crypto stocks, other stocks, or nothing at all is right for you.
Remember to always do your own research. Never take someoneâs word for a âgreat investmentâ they heard about at the pub. Look into the company yourself - thereâs no such thing as gathering too much information before you make a decision, especially when it comes to higher-risk growth sectors like crypto.
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The key thing to keep in mind when investing in cryptocurrency stocks is that you donât just need to consider the price of cryptocurrency, you need to think about the business underneath too.Â
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There are several categories of stocks that are linked to cryptocurrencies in one way or another. Some of the most popular ones have hit the headlines, but plenty of other firms are involved in crypto-related technologies.Â
FedEx, the worldâs biggest logistics management company, uses blockchain technology to plan and track shipments. Microsoft has been accepting bitcoin payments since 2014 and has a ton of blockchain-related patents to its name.
These categories are anything but exhaustive. And if youâre looking for exposure to crypto or blockchain technologies, remember there are tons of other ways to do so. The point is that itâs worth looking at your portfolio to see if you actually have some already without even knowing it.
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The following list of cryptocurrency stocks is not a recommendation to buy or sell any of the assets named. Itâs simply a list of stocks that can offer investors exposure to cryptocurrency, without buying or selling crypto directly.Â
Itâs not a suggestion of the âtop cryptocurrency stocks to buy in 2021â, or 2022 for that matter, but is instead a wrap-up of some of the most popular cryptocurrency investments on the Freetrade app last year.
Itâs worth remembering that many of these stocks are new to the market or rose to a much greater level of awareness over the pandemic. Cryptoâs a pretty young investable asset though, so while some of them might be the flavour of the month, the proof will be in how long they keep that popularity going.Â
If youâre comfortable with the level of risk involved when investing in a smaller company (many of the stocks below are found on the LSEâs AIM index), these might be some up-and-coming crypto stocks to keep an eye on.
Before we get stuck into the ways of investing in crypto stocks, itâs important to highlight that everyone has their own goals and unique financial circumstances. These, along with your tolerance for investment risk and time horizon, should inform the mix of assets in your portfolio.Â
Our resource hub for investing in the stock market might be able to help make that blend a bit clearer for you and our guide on how to invest in stocks is a great start for first-time investors. And if you are still unsure of how to pick investments, speak to a qualified financial advisor.Â
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Crypto mining is a costly endeavour. That means companies engaging in mass-scale mining are taking on major capital investments to do so. Mining and computing machinery, cooling equipment and electricity are just a few of the big ticket items.
Production costs for crypto miners are around $34,000 for one bitcoin, according to Coin Telegraph.Â
That means these companies have a lot to lose if the price of cryptocurrency crashes. They might not be able to sell their coins at a profit, and theyâll also be left with swaths of expensive equipment, massive warehouses and exorbitant power bills to pay off.Â
This is exactly the same as gold miners, who just switch everything off if the price of gold falls below their profit levels.
Cryptocurrency miners are also competing with one another for every âblockâ from the blockchain. The first miner to solve the complex maths problem needed to earn that block wins. They get the next block of the blockchain, which is then closed off. That part of the chain is secured, and itâs onto the next.Â
The more crypto miners that enter the space, the more competitive this process will become.Â
Crypto mining stocks are usually the first to come to mind when thinking about publicly traded crypto companies. After all, theyâre the ones producing bitcoin and other mined currencies, so their revenues are closely linked to the ever-changing price of the asset theyâre mining.Â
BIT Mining is a cryptocurrency mining company. In Q1, the firm produced 166 bitcoins from its mining machines.
Itâs been a bit of a tough time for BIT, with the miner having to exit China after the country banned cryptocurrency mining in 2021. That, coupled with this yearâs price fall for bitcoin led first quarter revenue to plummet 42.7% to $272.3m.
While thatâs still above the firmâs Q1 2021 revenue of just $2.6m, a sustained decrease in bitcoinâs price would likely be bad news for BIT.Â
If the price continues to drop, BIT will have to keep impairing the value of the cryptocurrencies it holds. Thatâs because the crypto is essentially in its inventory, so if it becomes worth less than BIT had initially hoped, they have to account for those changes. And it already had to pare back those values this quarter, slashing $7.7m from its inventory.
So while BIT is a proxy for directly investing in cryptocurrencies (and bitcoin specifically), that doesnât mean itâs a hedged way of dipping your toe into crypto.Â
If anything, even though you donât hold the cryptocurrency, BIT does and youâre betting on the firmâs ability to weather fluctuating prices in the hopes youâll benefit too.
Ebang is a blockchain computing company with ASIC chip-designing facilities. Basically, that means itâs a bitcoin mining producer that also earns money off the hardware it sells.
Total 2021 revenues were $51.5m, which was a 170.7% increase on the year before. But Ebang didnât shy away from the fact that this rise was primarily due to bitcoinâs price moves attracting a lot of new miners and investors to the market.Â
This yearâs been different, with fewer inflows into crypto and a lot more outflows.
If this trend persists, Ebang will likely see its sales volumes fall, as lower prices make it more challenging to earn a wide profit margin from mining operations.
In its first quarter of 2022, Riot Blockchain produced 1,405 bitcoin and increased revenue by 244% to $79.8m.Â
Thanks to a 67% profit margin on mining revenues, Riot grew profits nearly five-fold up to $35.6m. Wide margins have been key to the firmâs ability to maintain profits during a period when the price of bitcoin dropped significantly.Â
Riotâs been able to grow revenue through its consistent expansion strategy. The firm is expecting to complete a 240,000 sq. ft. (read: just over three football pitches) mining centre by the end of next quarter. And then itâll start building its next plant, which will be around the size of six Buckingham Palaces.
Even though the firm has managed some explosive growth over the year, it took on significant extra costs and stock-based compensation for staff. And itâs anything but immune to changes in the coinâs price, so a sustained drop in bitcoinâs value will make it harder to recoup those costs any time soon.
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Cryptocurrency stocks donât all mine the cryptocurrency themselves. Many offer ancillary services, be it blockchain research or consultancy services. That makes them a bit further removed from bitcoin itself, but their success undoubtedly remains tied to the coins.
Online Blockchain is an AIM-listed company focussed on blockchain research and development. Itâs also an incubator for other cryptocurrency startups.Â
That means the firm comes with even more risk than other listed blockchain stocks might, given itâs reliant upon startups (which arenât publicly traded) to successfully bring blockchain-related technologies to market.
The firmâs 2021 revenue was ÂŁ65,000, with an operating loss of nearly six times that at ÂŁ425,000.
Online Blockchainâs revenue streams are varied and stretch from developing a local cryptocurrency for Brazil to creating a crypto advertising platform. The firm doesnât break down what it makes from its separate endeavours, which makes it challenging (to say the least) to gauge just how successful each projectâs revenues are.Â
Without much clarity on plans to bring that revenue figure up, investors have got increasingly skittish, and the firmâs share price has been plummeting nearly all year.
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Argo Blockchain is a UK-based business listed on the LSE and NASDAQ. In its first quarter, Argoâs revenue grew 291% to ÂŁ74.2m, with a mining margin of 84%. That puts it firmly above Riotâs margin, but the fact is, how it managed those margins was largely out of its control.Â
The firm mined 1,831 BTC in its 2021 financial year. Its margin depends on the cost to mine bitcoin (mostly the price of machinery and electricity) and selling the crypto when the price is high.
Theoretically, the more a bitcoin miner can produce out of one facility, the more it can spread those costs around. So when a miner can achieve scale, their mining margin should benefit.Â
But at the end of the day, crypto miners are price takers as opposed to setters. They can try and impact the price by holding back bitcoin or selling when itâs increasing, but that margin will always be at the whim of whatever the market dictates the price to be.
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A crypto penny stock is likely to be a higher-risk investment than other crypto stocks because its low price point usually renders it less liquid. Typically, that means fewer investors are willing to buy and sell these shares, so they can be harder to sell at a price youâd like.Â
Donât be tempted by the penny price tag alone. Prioritising the price of a stock above everything else could lead to mistakes in your decision-making because price means nothing in isolation. And ultimately, making decisions without sufficient data will likely mean you take on much higher risk than needed.
Bit Digital is a NASDAQ-listed penny stock. Last year it produced 2,065.3 bitcoin and earned $96.1m in digital asset mining revenues, a 355% increase on 2021. The firm also managed to pull itself out of a loss and into profitability, going from a $1.8m deficit to a $4.9m profit.Â
While thatâs impressive growth, remember that penny stocks tend to be much more volatile than larger companiesâ share prices. While Bit Digital is now hovering around penny stock territory, just because the stock is cheap doesnât mean itâs a deal. So itâs crucial to understand the added risk of investing in penny stocks if you are considering adding them to your portfolio.
And while Bit Digital, similarly to the other crypto miners weâve seen so far, had a good 2021, this yearâs been much more erratic.Â
Bitâs had a few other hurdles to jump too. It was heavily involved in Chinese mining operations, which the country has since banned. But, Bit Digital is still subject to legacy legal and operational risks from having previously been a China-based company.Â
This is an added risk to consider when investing in any miners that have now been pushed out of the nation. In its latest earnings report, Bit noted it âmay not be able to sustain profitabilityâ as a result of shifting operations from China to the US.
Ah, yet another bitcoin miner in the mix. Core Scientificâs self-mining bitcoin production grew by 1,454% to 3,202 bitcoins in 2021. That puts the firm as the top bitcoin producer of all the miners listed here. In total, it earned 1,281% more from digital asset mining in 2021, reaching $133m in revenues.
In addition to mining, the firm sells crypto mining equipment, but these sales dropped by 18% to $26.3m for the year.
Interestingly, itâs also involved in mining hosting, which means other miners pay Core Scientific a rental fee to use its infrastructure and electricity. Hosting revenues increased 162% to $33.2m, reflecting hoards of new entrants flying into crypto mining last year.
So while Core Scientific has more business streams than most of the other firms listed here, theyâre all clearly linked to the price and success of cryptocurrencies. And so far this year, Core Scientificâs share price has plummeted in what looks to be a response to the sustained falling price of many cryptocurrencies. Itâs now a penny stock, after IPOing at $10 in 2021.Â
QBT is a UK blockchain penny stock.Â
The firm invests in blockchain and cryptocurrency startups. It also has in-house R&D aimed at innovating new mining technologies.
QBT was one of the AIM marketâs biggest risers last year as its share price rose 485.7%. The major movements were in response to two announcements.
In February 2021, QBT completed two capital raises to increase the computing power in its crypto data centre.
Then in October, it filed a patent for Bitcoin mining technology that optimises the process by eliminating any redundant computation. That makes the mining process faster, and the firm plans to use the technology for its own mining use.
Unfortunately, investors may have gone a bit too gung-ho on the headlines.
The firm hasnât yet reported its full year 2021 earnings, but for the first half of the year, it reported âŹ6,000 in revenue. Meanwhile, its administrative expenses were âŹ720,000.Â
Looks like itâll be a while yet until QBTâs investments in fellow crypto companies reap profits, and until it monetises its patented technologies.
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Past performance is not a reliable indicator of future returns.
Source: FE, as at 9 June 2022. Basis: bid-bid in local currency terms with income reinvested.
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Crypto gaming stocks tend to leverage crypto for in-app capabilities, such as buying add-on features or skins. Some of these firms also operate on the blockchain too and are developing NFTs.
Roblox, the online gaming platform, hit over 47m daily active users last year. Concerns over its ability to sustain and grow that figure in a post-lockdown 2022 seem valid, but the firm leverages user-created worlds and games.
Reliance on its own community, rather than internally hired developers, means that revenue growth from users is organic and likely cheaper.Â
As for the firmâs connection to crypto, itâs a somewhat tenuous link. There are musings the firm will create its own cryptocurrency which can be used in its digital worlds. Itâs unclear how its cryptocurrency would differ from Robux though, the firmâs existing in-app currency which lets users buy upgrades and add-ons for their avatars.
Then thereâs chipmaker Nvidia, which recently made its virtual world simulation platform free to creators. Its Omniverse software is a metaverse for engineers, enabling them to create their own virtual worlds.Â
Similarly to Roblox, thereâs potential for a snowball effect to take place. When customers and users generate their own metaverses, it adds to the legitimacy and popularity of these digital worlds in general.Â
As for its link to crypto, Nvidia just settled a $5.5m lawsuit with the SEC for failing to inform investors of how integral crypto mining was to its 2018 revenues. The firm had a huge boost from crypto miners buying its graphic cards that year, which were used to mine Ethereum.Â
Nvidia failed to disclose this to investors, who believed the sales growth was arising from its usual customers, mostly tech and gaming companies.
In short, Nvidia directly benefited from minersâ rising demand for its chips. Though itâs not as though demand for chips was in a lull prior to the crypto boom. Chip demandâs been sky high for years, with just about anything from portable electronics to EVs requiring the tech to function.Â
So if the crypto sector cooled down, Nvidia would lose some customers, but the demand taps wouldnât turn off altogether. That makes it a bit less exposed to changes in crypto price than some of the other firms listed here.
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While ETFs tend to invest in a diversified group of stocks based on the sector, industry or country they purport to represent, itâs crucial you look beyond whatever it says on the tin.
For example, the Invesco CoinShares Global Blockchain UCITS ETF doesnât include any of the firms discussed so far. Many of the ETFâs holdings are actually over-the-counter (OTC) stocks, which are much more volatile than Main Market listings.
âSource: Top 10 holdings of Invesco CoinShares Global Blockchain ETF (BCHS) as of 13 June 2022.
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Most of its holdings are also Japanese companies, which means the geographical spread of the ETFâs portfolio is quite concentrated. And although many of these firms have links to crypto and blockchain, for most of them, itâs far from their main revenue source.
For instance, Monex Groupâs biggest segment is its online securities trading platform. And most of Akerâs investments are focused on oil and gas as opposed to bitcoin.
If youâre wondering what your ETF holds, a quick glance at its factsheet can tell you everything you need to know. From then, you can decide whether it suits the investment objectives you have in mind.
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Hereâs a recap of the stocks we covered. Remember, itâs not a recommendation or suggestion to buy or sell any of the securities mentioned.Â
These are just some of the most popular shares bought by Freetradeâs users. The list is only a selection of crypto stocks trading on a number of different international exchanges.
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Before you consider investing in crypto stocks, you need to decide whether the high volatility and risk involved are suitable for you and your investment needs. Youâll need to be comfortable with a greater likelihood that the value of your investment could go down.
If youâre financially able to, and have the risk tolerance to take on a heightened level of uncertainty, then perhaps some of these crypto stocks could be a fit for your portfolio.
If you decide to invest in these shares, you can invest in cryptocurrency stocks in the same way as youâd invest in other publicly traded companies.
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We also have tons of other resources on how to buy stocks and shares.
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Remember that when you invest in companies investing in crypto, youâre really investing in the success of digital currencies. While these firms generate revenue (or at least, thatâs their aim) it doesnât make them inherently less risky than investing directly in crypto.Â
An investment in crypto stocks requires more than a belief bitcoin or another crypto will become an increasingly common payment method.Â
Movements in fiat currencies are often largely unexplainable. That makes it hard to know how theyâll ebb and flow.Â
So when it comes to investing in crypto stocks, youâll need to buy into the idea that people are getting better at predicting price movements. But people arenât exactly great with forecasts at the best of times, and crypto stocks are no exception.
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Important Information
This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.
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When you invest, your capital is at risk. The value of your portfolio, and any income you receive, can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.
Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change.
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