The Motley Fool

Avoid the Dogecoin Trap! Buy This 1 Bitcoin Stock Right Now Instead

Image source: Getty Images

Dogecoin has become one of the hottest cryptocurrencies in the last few months. Its rising popularity has attracted many stock investors’ attention. The two software engineers founded Dogecoin nearly eight years ago to make fun of the wild speculation in the crypto market.

Let’s discuss why you should avoid investing your hard-earned money in highly volatile digital assets like Dogecoin.

Avoid the Dogecoin trap

Dogecoin’s logo has an image of the Shuba Inu dog breed that gained popularity several years ago due to the Doge internet meme. At the time of writing, Dogecoin had a market cap of over US$65 billion. Interestingly, it was significantly higher than the market cap of most Canadian publicly listed companies, including TC Energy, Canadian Imperial Bank of Commerce, and BCE.

I don’t consider this meme-based cryptocurrency worth investing in, as its high market volatility is enough to wipe out small investors’ portfolios within a few days.

The 10 Best Stocks to Buy This Month

Click here to learn more!

Invest in this Bitcoin stock instead

I find blockchain technology really interesting and promising. However, Dogecoin might not be the right way to gain from it. While cryptocurrencies like Bitcoin and Ethereum could be a much better alternative to Dogecoin, their extreme volatility makes them unsuitable for small investors.

Investing in cryptocurrency mining stocks like Hut 8 Mining (TSX:HUT) could be another great way to get exposure to the surging cryptocurrency market.

Hut 8 Mining

Hut 8 Mining is one of the oldest and largest cryptocurrency mining companies in the world. It has its headquarters in Toronto, with its primary focus on developing blockchain infrastructure and Bitcoin mining data centres.

Hut 8 mined about 2,798 Bitcoin in 2020 — about 68% lower than the 8,618 Bitcoin in 2019. This resulted in a 50.4% drop in its revenue for the year to $40.7 million. In May 2020, the Bitcoin halving event took place that reduced the block reward to half around. This factor, along with a sharp decline in Bitcoin prices in early 2020, affected Hut 8’s Bitcoin mining.

On the positive side, analysts expect its revenue to rise by nearly 368% in 2021 to more than $190 million. Similarly, its adjusted net profit is expected to rise by about 460% this year to about $33 million with a solid bottom-line margin of 17.3%.

Buy its stock now

After posting a record high of near US$64,895, the Bitcoin prices have seen a correction in the last month. That’s one of the reasons why the shares of Hut 8 Mining have declined by 35% in the last 30 days. Bitcoin’s price could start soaring again in the coming months due to its rising utility across the world that could trigger a rally in Hut 8 stock. The company will announce its Q1 2021 results on Thursday.

Foolish takeaway

Despite its recent weakness, Hut 8 stock is currently trading with 61% year-to-date gains after posting solid 226% gains in 2020.

Its better-than-expected Q1 earnings and revenue could help its stock turn positive again. That’s why investors with a medium- to high-risk appetite may want to add its stock to their portfolio right now. Buying its stock for the long term seems to be a much safer option than directly buying meme-based cryptocurrencies like Dogecoin.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.

Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

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 Jitendra Parashar has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.