Buying Bitcoin Stocks: The crypto boom

 With Bitcoin stocks, you invest in companies linked to the cryptocurrency Bitcoin. We explain what to look out for when buying Bitcoin shares and which stocks are particularly interesting.

Cryptocurrencies attract high returns with low investments. That is why they hold a great fascination with private investors. For example, if you bought 100 Bitcoin for a total of 9 euros in August 2010, you now have assets of more than 3 million euros. But the rates of Bitcoin, Ethereum, and other cryptocurrencies are not a one-way street. For many investors, the risks associated with trading cryptocurrencies are too high. Bitcoin stocks are an alternative, with which you can benefit from the crypto boom even without direct investment. In addition, there has recently been a Bitcoin ETN or, most recently, the first Bitcoin futures ETF on Wall Street.

When buying Bitcoin stocks, you are investing in companies whose business model is anchored in the crypto market. Trading platforms, hardware producers, and tech start-ups: They all benefit from the growing number of investors in the crypto market and the associated increase in transaction volume.

    What is bitcoin

    Bitcoin is a cryptocurrency. The first transaction with Bitcoin took place on January 12, 2009. Since then, several thousand different cryptocurrencies have emerged. The largest cryptocurrencies according to their market capitalization are Bitcoin by a large margin ahead of Ethereum and Binance Coin. Bitcoin alone currently (as of October 19, 2021) has a market capitalization of more than 1 trillion euros. Read this full article about Bitcoin: Simply explained


    Bitcoin course 2021: cryptocurrency remains volatile

    The demand for Bitcoin fluctuates strongly - and with it the price of the digital currency. In 2017, Bitcoin reached new highs: US $ 5,000 in October, US $ 10,000 in November, and finally the annual high of US $ 20,000 on December 17, 2017. Then the bubble burst and the price only slid at The turning point came a good 3,000 US dollars. But volatility remains high. On March 12, 2020, alone, the price of Bitcoin fell 37 percent in one day. However, that was in the middle of the Corona crisis, in which stocks and bonds also crashed.

    The cryptocurrency continued to be turbulent in 2021. At the beginning of the year, the price was just under 25,000 euros. In April the price reached a new high of 52,000 euros. In the middle of the year, the price fell sharply against the background of the louder discussion about the ecological impact of Bitcoin mining. Bitcoin mining is the name given to the extraction of new Bitcoin, which involves complex arithmetic operations that require a lot of energy. Most recently, Bitcoin, fueled by buyers from institutional investors, was able to gain strength and is currently above the 50,000 euro mark again. So 2021 was a successful Bitcoin year, but also a very volatile one. Bitcoin is not suitable as a financial investment for investors with the faint of heart.


    What are bitcoin stocks?

    If you don't want to invest your money directly in Bitcoin because of the high risk, but still rely on the megatrend of digital currencies, you can invest in a Bitcoin share instead. These are stocks of companies whose business is either exclusively about Bitcoin. Or companies with a different core business, but which, for example, provide equipment for crypto mining or own patents.


    Bitcoin share: Nvidia benefits from Bitcoin mining

    Nvidia is one of the largest developers of graphics processors (GPUs) and chipsets for computers and game consoles. Nvidia originally developed these graphics cards primarily for gamers. Today, GPUs are also used in robots and self-driving cars to meet their huge demand for computing power. Specialized GPUs are also used to process transactions on the blockchain when mining cryptocurrencies. However, since this is currently not the main source of income for NVIDIA, the Californian company can benefit from a future boom in cryptocurrencies but is not particularly dependent on the Bitcoin exchange rate.

    The share broke one record after the other in the second half of 2020 and rose continuously in 2021 to currently just under 180 euros (as of October 2021).


    Bitcoin stock: Square processes payments in bitcoin

    San Francisco-based financial services company Square has two businesses. One, it specializes in processing mobile payments for merchants and small businesses. For this purpose, the company of Twitter co-founder Jack Dorsey markets various software and hardware products. On the other hand, Square has also developed the Cash App payment service, which private individuals can use to send money to one another using their smartphones. The app has around 30 million active users per month. Square is a Bitcoin share in two ways: Users of the Cash app can quickly and easily buy and sell Bitcoin using the included Bitcoin wallet. In 2020, Square increased its Bitcoin sales 9 times year over year to $ 4.57 billion. Also, Square has its own team of Bitcoin developers known as Square Crypto who have several interesting projects of their own.

    Square shares started the year 2021 at 180 euros. After the share cracked the 200-euro mark for the first time in February, the share was unable to establish itself above the limit. It was not until the end of June that the price exceeded 200 euros for the third time, where it has leveled off since then. Square shares are currently at just under 205 euros.


    Bitcoin share: AMD builds chips for mining bitcoins

    With the takeover of the graphics card manufacturer ATI in 2006, the chip manufacturer AMD positioned itself as a competitor of Nvidia. Theoretically, Bitcoin mining is possible with all GPUs, but AMD chips, in particular, have proven to be particularly efficient - also for mining the competing cryptocurrency Ethereum. Chips from other manufacturers such as Intel or Qualcomm are not considered here because they focus on the main processor (CPU).

    AMD shares rose sharply in the second half of 2020. Since the beginning of the year, it has increased again by a good 20 percent (October 2021).


    More than a Bitcoin share: The Bitcoin ETN

    The crypto world has been waiting for this for a long time, it has been possible since June 2020: A new financial product called BTC, etc Bitcoin Exchange Traded Crypto (BTC) can be traded on Deutsche Börse's XETRA trading platform. The price has more than tripled in the past twelve months (as of August 2021). According to the British ETC Group, this is the "world's first Exchange Traded Cryptocurrency (ETC) with central processing". What sounds a bit like ETF (Exchange-Traded Fund) is actually not an exchange-traded index fund, but a listed bearer bond (Exchange Traded Note or ETN for short).

    BTC maps the price development of Bitcoin and is 100 percent stored with physical Bitcoins. This structure is very similar to the already established structure of physically deposited gold ETCs. Since BTC is traded on regulated markets, investors can buy and sell the product in the same way that stocks can be traded in normal trading. Investors do not have to deal with the technical challenges of buying and storing Bitcoin, for example not setting up a crypto wallet or trading on unregulated crypto exchanges. What remains, however, is the strong volatility of Bitcoin because it underlies the bond.


    New: The Bitcoin Futures ETF

    On October 19, the first exchange-traded Bitcoin futures fund started trading on Wall Street. Many investors see this as a milestone for the cryptocurrency industry, other funds could soon follow. Proshares' long-awaited ETF offers exposure to Bitcoin futures contracts. Futures are bets on the future price development of an asset, in this case, Bitcoin. So the fund does not invest directly in cryptocurrency.

    The CEO of Proshares, Michael Sapir, justified this with the fact that the price of Bitcoin could not be definitely calculated. Rather, prices differed greatly from one another on the various trading venues, so that, in the opinion of the ETF publishers, a bet on the future is safer and more precise when it comes to market sentiment. Nevertheless, the ETF will probably show a strong correlation to the Bitcoin price.

    The New York Times writes that investors in particular welcome this development. Because the Bitcoin ETF not only allows you to participate in price fluctuations without directly owning Bitcoin. This financial instrument also gives American investors a whole range of new opportunities that crypto money could not offer before, such as trading in pension funds or options on the stock exchange. It remains to be seen whether and when the ETF will also be available in Germany. However, other providers are already working on further Bitcoin ETFs. So here are new opportunities for investors who do not invest directly in Bitcoin, but still want to benefit from the development.

    Conclusion

    Square is a Bitcoin share in two ways: Users of the Cash app can quickly and easily buy and sell Bitcoin using the included Bitcoin wallet. More than a Bitcoin share: The Bitcoin ETN The crypto world has been waiting for this for a long time, it has been possible since June 2020: A new financial product called BTC, etc Bitcoin Exchange Traded Crypto (BTC) can be traded on Deutsche Börse's XETRA trading platform. New: The Bitcoin Futures ETF On October 19, the first exchange-traded Bitcoin futures fund started trading on Wall Street.