Investing in Crypto Stocks: A Comprehensive Guide for Beginners

All there is to know about cryptocurrency stocks

Cryptocurrency stocks are a good investment if you want to gain direct exposure to the demand for digital currency, while a safer but potentially less lucrative alternative is to buy the stocks of companies with exposure to cryptocurrency. Despite the inherent risks, cryptocurrencies and the blockchain industry are consistently growing stronger. Much-needed financial infrastructure is being built, and investors are increasingly able to access institutional-grade custody services. Professional and individual investors are gradually receiving the tools they need to manage and safeguard their crypto assets.

Coinbase Global

Coinbase Global, a top cryptocurrency trading exchange, made its public debut in early 2021. The company is a top play on popular cryptos such as Bitcoin and Ethereum and allows users to trade more than 50 digital currencies. To date, this crypto trading platform’s success has been contingent on the increase in crypto prices, which, in turn, has led to millions of users signing up for an account. Coinbase earns a small transaction fee every time someone places an order to buy or sell crypto. But the company aspires to be more than just a place to trade. It also sponsors a debit card that allows consumers to spend from the balance in their digital wallet, it started a line of credit product for Bitcoin owners, and it launched a cloud platform for companies using and storing digital currencies.

Square and PayPal Holdings

Investor interest has grown as crypto asset prices have soared, but trading was never the original idea behind blockchain and cryptocurrencies. Digital payments with fewer intermediaries (and therefore lower costs for businesses and consumers) were a primary goal. Thus, enabling the purchase and ability to hold cryptocurrencies within a digital wallet is a natural fit for Square and PayPal Holdings, if these assets gain acceptance over time as a form of payment. In late 2017, Square’s Cash App consumer-facing application started allowing Bitcoin trading. In 2020 and 2021, Bitcoin was a huge revenue generator for Square, although the trading feature did little to help square’s bottom line. However, the company is helping to foster the use of Bitcoin among its business users (through the square ecosystem) and could become a top platform for transacting cryptos between companies and their customers. For now, though, Cash App is a top trading app, complete with basic banking features.

NVIDIA and AMD

Chipmakers NVIDIA and AMD don’t deal with cryptocurrencies directly, but these two semiconductor companies are the leading designers of graphics processing units (GPUs). Best known for powering high-end video game graphics, GPUs now enable computing-intensive applications such as data centers, artificial intelligence, and the creation of crypto assets. Cryptography and blockchain creation requires immense computational power, and GPUs are well-suited for the job. Back in 2018, booming cryptocurrency prices were a driving force for NVIDIA’s and AMD’s stock price increases, as digital currency “miners” (people using their computers to create new units of digital assets) scrambled to purchase GPUs for the task. GPUs remain a fundamental piece of hardware for the creation and management of crypto assets. NVIDIA even launched a new lineup of chips specifically for crypto mining in early 2021.

CME Group

CME Group operates the world’s largest financial derivatives exchange, allowing investors to trade futures, which bet on or secure the future price of an asset, and options, which grant investors the option to sell or buy an asset in the future at a predetermined price. CME Group’s exchange trades a diverse assortment of assets, including agricultural and mining products, energy, stocks, and currencies. It’s the latter that makes CME Group a crypto stock. At the end of 2017, CME established the first market for bitcoin futures, and, at the start of 2020, the company created a market for options on Bitcoin futures. As of February 2021, Ether (units of the crypto platform Ethereum) also has futures available on the exchange. Establishing an exchange for derivatives of the best-known cryptocurrencies has given Bitcoin and Ethereum some extra legitimacy and provided a way for digital currency owners (both individuals and a growing list of businesses that accept cryptocurrencies as payment) to mitigate risk from changes in cryptocurrency prices.