If the volatility of bitcoin prices puts you off buying, then consider investing in crypto stocks. This might be an attractive idea if you have other stock market investments; a way to benefit when bitcoin and other cryptocurrencies rise, without having to spend months understanding the whole bitcoin ecosystem.
Bitcoin Status – Property or Currency
This is important because it affects taxation.
The IRS has deemed all cryptocurrencies to be property, meaning that every transaction means a capital gains tax (CGT) bill.
In Europe, the European Central Bank (ECB) treats bitcoin and other virtual currencies as currency. Taxation in the EU varies by country and some countries treat crypto the same as the IRS, making you liable for CGT. On the other hand, Switzerland and Portugal have made all cryptocurrency transactions tax-free.
Taxation is complicated. Consult a local tax expert before making ANY investment.
Research
Bitcoin price movements come down to supply and demand.
These are affected by news in the same way stocks are, but bitcoin movements are often extreme when changes in future demand are perceived. Understanding how bitcoin works takes a lot of research. If you already understand how the stock market works, it might make more sense to invest in stocks that rise in price when bitcoin prices rise.
As with any stock market investment, you need to find a reliable advisor who can predict the next day’s prices based on after-hours trading. For more details check out https://www.stockstotrade.com/.
Cryptocurrency stocks tend to lag behind bitcoin prices by a few hours. Chart predictions for crypto-related stocks are possible using common indictors such as trading volumes and resistance price levels. Nobody can make accurate short-term predictions for cryptocurrency values, but you can follow the latest updates to check the top rated crypto stocks to watch. This makes crypto stocks an excellent choice for day traders.
Volatility
Bitcoin prices vary wildly in the short-term, but the trend is up over the long-term, with some commentators expecting bitcoin prices to rise from $60,000 currently to $100,000 by the end of 2024. BUT no investment is ever 100% guaranteed, and prices could crash, as other crypto-analysts are predicting.
Volatility is only positive when looking at price rises. It is disastrous when prices are falling.
Short-Term vs. Long-Term Investment
In the long term, both bitcoin and crypto stocks will rise. Both will fluctuate from day to day, but the trend will always be upwards.
Stocks are predictable because the fundamentals behind companies are known factors. Bitcoin prices are less predictable, and they often fall a long way over a short period.
The CoinDesk.com screenshot above shows the all-time bitcoin price chart.
If you had bought at the peak of the boom in 2018, you would have lost more than 75% of your investment over the next year.
Looking back, we can see good reasons for this crash, but you don’t have the benefit of hindsight when investing your money.
You must accept some risk, but you don’t expect to lose most of your stake so quickly.
If you leave your money in bitcoin the next crash could hit just when you need to sell up. You might have to wait three years for the price to recover.
Let’s look at PayPal Holdings, Inc. – This is yet a firm that needs no introduction. Ever since its inception, PayPal has successfully garnered millions across the globe and continues to be a major payment mode. The reason why PayPal is trending right now is that it facilitates cross-border funds transfer at very little cost.
Earlier this year, the firm has already allowed the use of bitcoin for various purchases through it. Therefore, it is a safe option for everyone to consider, as far as investing in crypto stocks is concerned.
Another company we’d like to look at would be – Canaan Inc. Also chanted as NASDAQ
This company is chanted as one of the best stocks to invest in right now. Canaan is a veteran Chinese company that actively sells micro processing solutions for people interested in crypto mining right now. Because Beijing has already cracked down on the crypto operations, the firm has successfully expanded its horizons overseas with a staggering 538% revenue growth in the first three months of its operations. If you’ve been chasing this firm for a long time, you must know that the company decided to sign a deal to supply 10k mining machines by the end of the month.
Personal Preference
Cryptocurrencies are never backed by assets. The only rationale behind the price of bitcoin is its supply compared to demand.
Many investors prefer to see annual accounts, predictions for growth, and price charts they can draw lines on before they stump up their money. Companies that are invested in crypto technology provide all of these, so investors can make rational decisions when to buy or sell shares.
Just like in the Californian Gold Rush. The most reliable way to make money might be to sell tools, which is what crypto companies do.
Costs
This is one area where buying straight crypto beats buying crypto stocks. Online brokers boast of zero fees, but they make their money on the spread between buying and selling costs. This spread costs you a lot more than $3 on every transaction.
Risk vs.Reward
Whether you invest in crypto stocks or directly in cryptocurrencies such as bitcoin depends on how much risk you are happy with.
If you prefer less risk, then go for the crypto stocks because their prices are more predictable, especially given the few hours lag behind the bitcoin price. If you need your money in a hurry, you are less likely to lose a large portion of it due to a short-term crypto price crash.
If you are happy with a high-risk scenario, then investing in bitcoin MIGHT offer higher rewards that make up for the chance of losing a large part of your investment if you need rapid access to your cash.
