Cryptocurrencies are a very risky asset: the price can change by several percent a day, and it’s unlikely to predict the price and yield. But some investors put some money into cryptocurrency in the hope of multiples growth or are looking at such assets.
Cryptocurrencies are traded on regular exchanges, but there are still ways to invest in them – through shares in companies that own, trade or mine cryptocurrencies, or through funds. We tell you how to invest in cryptocurrency.
MicroStrategy (MSTR)
The company develops software, but it has about 114,000 bitcoins. That’s about $7.7 billion.
The more expensive bitcoin is, the more the company’s assets and its stock are worth, and vice versa. However, the correlation is not perfect and the company itself is operationally unprofitable.
Coinbase (COIN)
This is a U.S. cryptocurrency exchange whose shares began trading publicly in April 2021.
The exchange earns on commissions from cryptocurrency transactions. The more popular and volatile the cryptocurrency, the better for business.
Riot Blockchain (RIOT), Marathon Digital (MARA) and others
These are companies that mine cryptocurrency, most often bitcoin. Usually such companies own large amounts of cryptocurrency. For example, Marathon Digital has 7,453 bitcoins worth $506 million.
The more expensive bitcoin, the more expensive the companies’ assets are and the more profitable it is to mine the cryptocurrency. Meanwhile, from March 2020 to March 2021, the beta ratio for mining stocks was about 2.5: if bitcoin rose or fell by 1%, the stock rose or fell by 2.5%
Bitcoin funds: GBTC, BTCC and others
There is the Grayscale Bitcoin Trust (GBTC) in the United States. It has been operating since 2013 and tracks the price of bitcoin. The fund has over 654,000 bitcoins worth $44.5 billion.
GBTC’s price has often deviated from its fair price. In 2017, a GBTC unit was 132% more expensive than it should have been, and in November 2021 it was 15% cheaper.
Canadian ETFs like BTCC and BTCX should better track the bitcoin price. However, they only appeared in 2021 and it is too early to judge. Also in the U.S., the BITO ETF, based on bitcoin futures, was recently launched. These funds have lower commissions than GBTC.
Ether funds: ETHE, ETHX and others
Grayscale has an ETHE trust that tracks the price of ether. The problem is the same as with GBTC: the price has often deviated from fair. At the end of 2018, the unit was 3,550% more expensive than it should have been. It is now 3% cheaper than the fair price.
Canada also has ETFs that track the price of ether – these are the ETHQ, ETHX and other funds. Costs are 1.25% a year or lower – versus Grayscale’s ETHE’s 2.5% a year
AXRP, HODL and others
Notes that track the price of various cryptocurrencies are traded on European exchanges. Unlike ETFs, notes, i.e. ETNs, have credit risk because they are a debt obligation of the company that issued them.
Here are examples: AXRP tracks the price of the cryptocurrency Ripple, HODL contains five currencies at once, and VBTC tracks bitcoin. There are more than 20 such products in Europe. Costs range from 0.95 to 2.5% per year.
