It’s now possible to invest in cryptocurrencies through traditional stock trading platforms thanks to publicly traded blockchain stocks. Not all of them however are directly involved with cryptocurrencies. A blockchain after all is a decentralized database. The fact that the principal use case for a blockchain is cryptocurrency is merely a reflection of the fact that Bitcoin’s inventor Satoshi Nakamoto invented the blockchain in order to fill the need of creating an immutable public ledger capable of hosting a public record of every Bitcoin transaction ever completed.
Today, institutions are using blockchains to fulfil many other needs. IBM uses blockchain technology to keep track of data as products move along the company’s supply chain. Governments are using it to store social security numbers and passport information. Even the knowledge and decision-making processes programmed inside of artificial intelligence robots is all stored using blockchain technology.
So as you move through the rest of this post and consider investing in blockchain stocks, we’ll distinguish between stocks that earn their revenues off of cryptocurrency directly and those implementing blockchain for other use cases focused on practical day-to-day data storage.
More on Cryptocurrency Blockchain Stocks
Although the cryptocurrency industry is now 11 years old, some people out there are still sceptical about the way the buying and selling process works, the way government’s tax crypto related activities, and the fact that hackers are still finding ways to expose security loopholes in wallets and exchanges. These concerns don’t just present themselves among newbies. Even multiyear veterans of the crypto game are tuning out. It’s what happens when investors lose a lot of money.
That’s why many people interested in capitalizing off of the potential explosion of cryptocurrencies prefer to just buy stock in publicly traded companies that are engaging in mining, lending and trading on behalf of investors. It’s still easier for most people to wrap their head around opening an account with a stock brokerage as opposed to opening an account with a crypto website or exchange.
The Advantages and Disadvantages of Investing in Crypto-Specific Stocks
Familiarity is the biggest advantage to owning crypto-specific stocks for the reasons noted above. It’s simple. You open a stock trading account with your broker or your bank, Google search the stock symbol for the company you want to buy shares in, place your order and off you go!
The main disadvantage of investing in crypto-focused stocks is two-fold. Number one, while many of these publicly traded companies are run by a large staff of people in an organized, regulated and professional setting, any company whose profits are dependent on the performance of cryptos are subject to huge swings in the share price. These companies may be large in comparison to the communities that support individual crypto projects, but they are still relatively small in comparison to the blue chip stocks that stand at the top of the mountain on Wall Street.
All this means trading crypto-focused stocks is just as volatile and risky as trading actual cryptocurrencies. It also means many stock trading platforms won’t let investors use government registered accounts like retirement plans or college education funds to trade these investments. That’s true for the broader blockchain-focused companies too.
Blockchain-Focused Stocks: Pros and Cons
The most obvious advantage to choosing to invest in companies that implement the blockchain for use cases outside of cryptocurrency is that you’re not at the mercy of the 30 to 40% swings digital currencies often experience. Yet at the same time, you’re still getting a piece of the pie. Anybody calling this kind of investing a conservative approach is fooling themselves, but investing in blockchain without mixing in cryptos is at least a tiny bit more conservative in comparison to riding the Bitcoin wave exclusively.
We’ve already touched on the downside of investing in broader blockchain stocks. Many can’t be traded in government registered retirement, education or disability-related accounts. Still, at the end of the day they offer you exposure to an exciting new industry. Let’s dive deeper into specific companies and weigh the pros and cons of investing in them.
NOTE: this post isn’t ripe with investing advice. It won’t cover fundamental and technical analysis. Consider this a starter’s guide to the overall industry so that you can get your feet wet and understand what’s going on. And for what it’s worth remember, most serious stock market investors (Warren Buffett included) still think cryptocurrencies have little to no value.
Let’s get into actual crypto-specific companies.
Neptune Dash Technologies (TSX)
Dash is a privacy-focused cryptocurrency most major crypto exchanges will sell you. It’s basically a faster, more private version of Bitcoin. Neptune Dash Technologies is a publicly traded company that trades on the Toronto Stock exchange under the symbol DASH. The company owns a large number of Dash masternodes that allow it to mine coins for a profit. Staking coins back to the Dash network also earns the company a return.
In February of last year, the stock was trading at over 60 cents per share Canadian. Today, it’s trading at less than 10 cents. The company’s valuation swings alongside the crypto market. When altcoins go through an upswing, Neptune Dash Technologies shareholders will be happy. Just remember 10 cents is a long way from 60 cents. It’s also possible to lose a lot of money too.
Riot Blockchain Inc. (RIOT)
Riot mines crypto on a large scale. The company website says it mined 329 Bitcoins in the first quarter of 2019 alone. At $11,000 per Bitcoin, that’s over $3.6 million in three months. The company runs its mining operation in Oklahoma City, but that’s not the only way it makes money.
It’s also a shareholder in Coinsquare, one of the most used cryptocurrency exchanges in Canada.
OverStoock.com and tZero
OverStock.com is no longer an e-commerce platform. The retail sales portion of the business is someone else’s property now. tZero is going all out on the blockchain, offering users a fingerprint secure wallet. In the most recent quarterly conference call, the company announced it was losing tens of millions of dollars to make this happen, but the hope is future profits will outweigh the current expenses. The company plans to expand on its cryptocurrency offerings in the long run and even hopes to introduce to a new of technology that will allow users to recover cryptocurrency even when the user loses their private keys or mobile device.
Facebook’s Infamous Crypto Project: Libra
Here’s the project everyone’s talking about. The company behind Libra trades on the NASDAQ. Aside from Libra, Facebook makes big money promoting two other platforms: Instagram and WhatsApp. Mark Zuckerberg plans to combine the advantages of the two apps with Facebook and build a super app. He’s under fire right now for introducing Libra to the world and registering its operations in Switzerland. That might be the downside of investing in the crypto hopes of Facebook. The upside is that even if the worst case scenario comes to fruition and government’s squash Libra, the fact is Facebook and its 2 billion users have a major influence on the world’s social conversation and the data the company owns is priceless. Facebook shares are currently trading at $185 USD each. That’s up approximately 37% from the start of the year.
Other Crypto Stocks
Square is a payment processor that makes it easy for businesses to accept credit cards. Soon every retailer that uses their services will be able to accept digital currency. Square trades under the stock symbol SQ on the New York Stock Exchange.
AMD trades under the letters AMD on the NASDAQ. The company makes the infamous ASIC computer chips that drive the processing power behind many large-scale crypto mining operations. As Bitcoin’s scarcity grows and the coins become more valuable, processing power will come at a premium and AMD shareholders should benefit. NVIDIA is a competing company worth a look. The company makes graphics cards for gamers and crypto miners are now using them too. The cards are so popular in the space NVIDIA says that while the company can justify raising their prices because of demand, they’re keeping the cards cheap so that gamers can still afford them.
Blockchain Stocks Not Into Cryptocurrency
As mentioned at the beginning of this post, IBM uses blockchain technology to manage its own supply chain. That’s just where the blockchain fun starts. The conglomerate now makes its money consulting Fortune 500 companies, serving their technological needs. Many of their clients want their data on the blockchain too. IBM is a solid long-term investment just because it’s a big company that has been around for ages. It also keeps its eyes on the future of innovation.
Blockchain Intelligence Group aims to go “behind the curtain” of cryptocurrencies. The company works with financial institutions, law enforcement and government regulators on improving anti-money laundering strategies and policies. They also specialize in compliance and blockchain forensics. BBKCF is the stock symbol currently trading on the over-the-counter market.
TruTrace Technologies is drawing interest from investors who are into both blockchain and cannabis. That’s because TrueTrace helps cannabis companies keep track of their inventory and intellectual property. Its blockchain helps reduce the costs of managing data associated with quality control and government regulations. The company trades on the TSX Venture Exchange.
Block One Capital Inc. invests in several blockchain companies. One plans to transform America’s mortgage collateral and compliance marketplace. Another plans to decentralize KYC and AML compliance initiatives. Block One recently sold its interests in cryptocurrency mining.
Global Arena Holding Inc. (GAHC) owns several subsidiaries. Its bread and butter is Global Election Services, offering what else, large-scale elections services on the blockchain.
No Boarders (NBDR) generates revenue in multiple lines of business including health and wellness products, dentistry and tech consulting. The company plans to implement and offer blockchain services in each industry. It’s a well-diversified but small company.
Before You Invest In Blockchain Stocks
Remember that investing in the blockchain industry is risky. Also keep in mind that there are dozens of other companies not in this post putting their skin in the game. The advantage of investing in these projects through the stock market is that you avoid the perils of hacking and the monstrous price swings of the crypto market.
Even though experienced billionaire investors like Warren Buffett don’t like cryptocurrency (he once compared Bitcoin to rat poison), the basic principles of investing should still apply. Research and analyze companies as if you’re going to hold onto their shares for a long time (even if you are only planning to hold short-term). Never invest more than you’re willing to lose, and diversify your portfolio outside of just investing in cryptocurrency or blockchain technology.
While some experts contend that the Bitcoin bubble officially burst in December of last year, remember that the stock market goes up and down in cycles. Today’s bull market is tomorrow’s bearish trend. Also keep in mind that while everybody has a friend making hundreds of dollars a day analyzing trends and executing seemingly prophetic day trades, the average investor is better off following a long-term strategy.
So don’t get caught up in the hype of the next hot penny stock, or the next big company adding the word blockchain to its name. Remember that it’s a lot easier to avoid losing money in stocks than it is to pick the next skyrocketing millionaire maker.
