With All the Focus on Reddit, Is it Time to Buy Bitcoin?

Cryptocurrencies have seen a noticeable decline in value over the past two weeks. Is this a buying opportunity?

| More on:
Diagonal chain made of zeros and ones. Cryptocurrency and mining.

Image source: Getty Images

Since last October, cryptocurrencies have seen a meteoric rise in value. Bitcoin has increased as much as 265% since the start of October. Other cryptocurrencies like Ethereum have posted exceptional returns as well, rising nearly 300% over the same period. Why are these cryptocurrencies rising?

One reason could be the large influx of institutional investments into the space. In December, MicroStrategy announced that it had purchased more than $1 billion worth of Bitcoin in 2020. The company managed to do this without pumping the cryptocurrency’s price by strategically placing a large number of small orders over a long period of time. Since then, retail investors have taken to the space by storm, causing its price to skyrocket.

In late January, the focus of the stock market moved from the cryptocurrency space and onto WallStreetBets, a popular Reddit forum. The page had previously gained notoriety among retail investors for the content posted in the forum. Many users would post massive gains and losses as a result of extremely speculative trading.

One user ignited a frenzy when he posted that a certain hedge fund was heavily shorting GameStop stock. As a result, the attention of many retail investors shifted from cryptocurrencies and onto the new trend. This caused Bitcoin and Ethereum prices to spiral downward to close out the month. As of this writing, Bitcoin trades about 17% from its recent highs. In comparison, Ethereum is about 3% from its recent highs.

Is it time to buy Bitcoin?

With that said, is it time to buy Bitcoin? The opportunity today is certainly quite attractive. Bitcoin and the companies that operate in the space are all trading at much nicer valuations. One company that investors should consider is Galaxy Digital (TSX:GLXY). The company offers alternative investment management services focused on the digital asset and blockchain technology industry.

Galaxy Digital is led by ex-hedge fund manager Michael Novogratz. As of its Q3 2020 earnings report, the company reported a digital asset position worth more than $240 million. It is certain that the number is much larger now, as that earning report occurred before the Bitcoin boom. I first covered the company in September 2020, and today Galaxy Digital is trading more than 160% higher since then. This is despite the stock falling about 25% from its recent highs.

Investors can also consider Bitcoin-mining companies like HIVE Blockchain (TSXV:HIVE). The company continuously produces Bitcoin and Ethereum onto the cloud. As of March 31, 2020, about 70% of the company’s portfolio consisted of Ethereum. At that time, HIVE Blockchain held about a 25% portfolio weighting toward Bitcoin.

Much like Galaxy Digital, HIVE Blockchain stock is up an incredible amount since October climbing as much as 840% over that period. With retail investors moving funds from cryptocurrencies and into meme stocks like GameStop, today may be an excellent opportunity to enter the Bitcoin and Ethereum space. With many large institutions beginning to back them, both cryptocurrencies have a bright future ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jed Lloren has no position in any of the stocks mentioned. David Gardner owns shares of GameStop.

More on Investing

A shopper makes purchases from an online store.
Tech Stocks

Shopify Stock Rose 15% in November: Is it a Buy Today?

Shopify (TSX:SHOP) stock rallied 15% this month but is still down 69% year to date, so should investors worry that…

Read more »

Man holding magnifying glass over a document
Investing

The 3 Most Oversold TSX Stocks to Watch Before 2023

Many oversold stocks are merely victims of market circumstances and potentially profitable bargains when they seem downtrodden.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

A TFSA Contribution Room of $88,000 and 1 Dividend Aristocrat Can Make You $172,330 Richer

A high-yield Dividend Aristocrat in the energy sector is a suitable holding for Canadians with $88,000 available contribution rooms in…

Read more »

Upwards momentum
Investing

Year-End Sales Tracker: 3 Growth Stocks Going for Value Prices

Growth stocks like Aritzia (TSX:ATZ) are on discount.

Read more »

Dollar symbol and Canadian flag on keyboard
Investing

2 Canadian Stocks I’ll Be Buying Hand Over Fist in 2023

Alimentation Couche-Tard (TSX:ATD) and another top growth stock could increase dividends in 2023.

Read more »

falling red arrow and lifting
Stocks for Beginners

3 TSX Stocks That Could Rally Before 2023 Begins

Here are three TSX stocks to consider, even if inflation remains adamant next year.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Dividend Stocks to Buy Now Under $50

Here are two of the best under-$50 dividend stocks you can buy in Canada right now.

Read more »

oil and natural gas
Energy Stocks

2 TSX Energy Stocks That Could Break Through the Roof in December 2022

Did you miss the energy rally? Here are two TSX energy stocks that still offer handsome growth potential.

Read more »