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Nicholas Kitonyi
Nicholas Kitonyi
Articles  | Author's Website |

Is Now the Time to Invest in Bitcoin Stocks?

There are avenues for stock market investors

November 02, 2017 | About:

The cryptocurrency market has been one of the highlights of the year, primarily because of the massive gains posted by bitcoin and ethereum among other cryptocurrencies this year. The bitcoin price has doubled over the last three months and is up 665% since the start of the year.

Nonetheless, the current price levels weren’t achieved without major pullbacks, which saw the pioneer cryptocurrency shed 10% to 20% during some trading sessions. These pullbacks expose one of bitcoin’s biggest risks, volatility. As such, some investors are put off by the premium pricing coupled with the likelihood that prices could nosedive significantly at any time.

This has led risk-shy investors to search for minimal risk options that they can use to invest in what appears to be a potentially industry-redefining product. Bitcoin is tipped by its staunch supporters to replace fiat currency in the future as more transactions enter the digital space.

The growing popularity of the cryptocurrency market can no longer be ignored even though Warren Buffett (Trades, Portfolio) believes that Wall Street is wrong to accommodate big price movements in cryptocurrencies. Buffett maintains his stand that bitcoin is not a value-producing asset, which makes its high valuation unverifiable.

Other renowned investors, corporate institutions and even fund management companies have started to show interest in bitcoin and the cryptocurrency market as a whole, with some investing significant amounts of their funds.

Some of these funds present a perfect opportunity for risk-averse investors to pounce on the crypto market while there are also publicly listed companies that have clear links to the cryptocurrency market.

So, for retail investors looking to profit from the crypto bubble without bearing the weight of the substantial risk that comes with the market, here are some potential avenues that they can use to pounce.

Bitcoin Investment Trust (GBTC) is the best place to start for those looking to make as much as possible from bitcoin without buying the coin itself. Barry Silbert, the man behind Bitcoin Investment Trust and one of the most popular crypto investors, is on a mission to bring retail investors to the cryptocurrency market.

And while some critics have termed it a joke, Bitcoin Investment Trust has overcome the odds to become the first publicly traded Bitcoin Fund. It was launched as a private investment fund in 2013 and went public two years later at a price of $32. And as of Nov. 1, the price was within reach of the $1,000 level after closing the day’s session at $944.

With the bitcoin price hitting $6,640 later in the day, buying shares of Bitcoin Investment Trust might be a logical option as they currently trade at under $1,000 per share.

ARK Web x.0 (ARKW) is another option for those looking to invest in bitcoin with limited exposure to the volatility of the cryptocurrency market. ARK is an innovation-focused ETF that historically invests in cloud computing, Big Data, Internet of Things, E-Commerce and Digital Media.

In 2015, it became the first electronically traded fund (ETF) to invest in Bitcoin by purchasing the shares of the publicly traded Bitcoin Investment Trust. While announcing the decision to invest in bitcoin at the time, ARK founder and Chief Investment Officer Cathie Wood said, "We're believers in bitcoin, the currency, and bitcoin, the technology platform. We also believe that current prices present an attractive entry point for our investors."

Since the turn of the year, the price per share of ARK has increased 65% from about $26 per share to about $43 per share while trading volume has also increased significantly since May.

ARK invests primarily in innovative technologies and Bitcoin has demonstrated its potential to take over the currency market at some point in the future. The cryptocurrency market harbors some serious volatility risks and investors looking for cushion could profit by investing in ETFs like ARK Web.

Not a fan of ETFs? Then let’s try Microsoft Corp. (NASDAQ:MSFT), the office software giant. For those obsessed with bitcoin, it might be hard to look beyond the coin. Bitcoin, as this article on InvestorPlace.com notes, may not be the disruptive force to which most of its staunch supporters allude.

It is, in fact, the network infrastructure upon which it runs that is emerging as one of the most interesting technologies of the information age. Blockchain, as it is known in the technosphere, is a general ledger database in which cryptocurrency blocks are encrypted to facilitate decentralization of trust. This is crucial for digitized transactions.

Microsoft is one of the biggest investors in Blockchain technology. It launched Ethereum Blockchain as a Service on its Azure cloud in 2015 and is now building an even more powerful service dubbed Blockchain as Service.

Azures blockchain development framework supports multiple blockchain protocols and is now able to implement “smart contracts” that are legally binding. The company has also developed a framework for enterprise blockchain networks that goes by the pseudo name Coco.

Based on these developments, it is correct to say that Microsoft has invested heavily in Blockchain technology upon which many services including cryptocurrency trading run. Blockchain looks like a technology that can have a major impact on any industry now, which is good for Microsoft investors.

And given that Microsoft is a megacap stock, this could yet be the best opportunity from which to profit when capitalizing on what drives the cryptocurrency market.

Conclusion

Bitcoin has made all the highlights in 2017 and in doing so, it has increased the popularity of the cryptocurrency market and blockchain technology. The cryptocurrency market is deemed to be significantly overvalued going by the current prices, especially when looking at the scenario from the perspective of value investing.

This makes it difficult for risk-shy investors to capitalize. As discussed in the article, though, there are a few options that investors can pursue to benefit from the cryptocurrency boom. Whether it’s Bitcoin Investment Trust or ARK Web, it depends on the risk appetite of the investor. Microsoft is also a realistic option for those looking at the technology behind the cryptocurrency market.

Disclosure: I have no position in any stock mentioned in this article.

About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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