Crypto + BTC: 3 Crypto Proxies – March 16, 2023
Understand the difference between Bitcoin and Crypto
Bitcoin, the world’s first and most popular cryptocurrency, and the crypto industry as a whole are often confused. If you’re interested in trading crypto or even just educating yourself about the space, it’s important to understand the difference between the two.
Bitcoin is the most traded crypto in the world and has had a dizzying performance since its inception about a decade ago – rising from $0.09 to nearly $25,000 today. Like most cryptocurrencies, Bitcoin runs on blockchain technology – a kind of encrypted digital Excel spreadsheet (ledger) that stores data and “links” it through several different areas of the internet. However, unlike most other cryptocurrencies and fiat, Bitcoin is:
· Truly decentralized: To this day, Bitcoin’s creator (or creators) is unknown. Instead, credit is given to a pseudonymous, composite founder known as Satoshi Nakamoto.
· Deflationary: Unlike global, government-backed fiat and many other cryptoassets, Bitcoin has a limit to the number of coins that can ever be minted. Satoshi ensured that no more than 21 million Bitcoins can ever exist.
· Implements a Proof-of-Work protocol: The Bitcoin blockchain validates transactions through thousands of miners. Miners solve complex mathematical equations and validate transactions. Because it requires a multitude of miners to validate transactions, the Bitcoin network has never been hacked. (However, crypto exchanges have).
For the reasons mentioned above, and the recent demise of the FTX exchange (and its “air” coin FTT), many crypto-enthusiasts are “Bitcoin maximalists” who avoid “alt-coins” like Ethereum. Regardless of where you stand on the argument, crypto has made an impressive comeback in recent weeks – despite a volatile stock market and negative news. Below are 3 unique ways to play crypto and Bitcoin via public funds (without investing in the coins themselves):
1. “Selling the Spades”
Investors looking to cash in on a crypto turnaround may want to look at secondary companies. In other words, companies that indirectly benefit from an increase in crypto trading and activity rather than the direction of the crypto markets. Coinbase (COIN – Free Report) , the largest US-based crypto exchange, stands to benefit if crypto trading starts to pick up again. Despite slowing earnings growth and the FTX debacle, COIN stocks are showing a clear change in character. Since the bottom in late February, the stock has more than doubled and has cracked its 200-day moving average for the first time since it went public in April 2021.
Semiconductor suppliers such as Advanced Micro Devices (AMD – Free Report) and Nvidia (NVDA – Free Report) is a way to play an increase in crypto mining and buying crypto “rigs”.
2. BITO ETF: The Proshares Bitcoin Strategy ETF (BITO – Free Report) is the first to be approved in the United States. Like Coinbase, BITO is crossing its 200-day moving average for the first time since its inception. Investors can buy shares in the ETF or even play it via options to limit risk.
3. MicroStrategy (MSTR – Free report): Microstrategy is a software company that has adopted the “Bitcoin Standard”. In other words, cash generated from the software operation is used to accumulate Bitcoin.
The bottom line
Bitcoin, the crypto market and public companies have several differences. Investors who don’t want to invest directly in cryptocurrencies can invest in public “proxies” and still benefit from a crypto turnaround. Although the crypto space has been on a solid run recently, more investors may be looking to diversify into the space as confidence in banking stocks wanes.
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