The cryptocurrency volatility is back. After rising above $52,690 for the first time since May, Bitcoin’s price fell 11%. Many tried to find the cause of the decline. But remember, Bitcoin price is not affected by “market forces or regulatory announcements,” the words of David Gerard, author of Attack of the 50-Foot Blockchain.
Why did Bitcoin’s price fall?
Even I tried to understand why BTC’s price fell to decide if this is the dip to buy crypto stocks. If you follow crypto, you know that the Latin American country El Salvador adopted Bitcoin as a legal tender on September 8. This is the first time a cryptocurrency got the status equivalent to paper currency.
What do I mean by legal tender? It means you can buy a burger, pay your taxes and rent, and do everything else using BTC. You can even exchange BTC for paper currency. This was the day crypto bulls have been waiting for.
But like any new technology or system, the BTC adoption was not smooth. There were bumps and glitches. For instance, the digital wallet was not functioning, and later the El Salvador government had to unplug the wallet to cope with huge demand. El Salvador is basically a case study for beta testing the global adoption of Bitcoin.
Some say that it was the issues in adoption that caused the BTC dip. An 11% dip is normal for cryptocurrency. Moreover, El Salvador is a small country, unless you are counting on the butterfly effect it can have on the future of crypto. I don’t think it was El Salvador that caused volatility. It was just the technical indicators. But whatever is the case, any dip is an opportunity to buy, as crypto has the potential to co-exist with paper currency.
Buying into the future of crypto
Canada offers some crypto-related stocks and ETFs:
- Purpose Bitcoin CAD ETF (TSX:BTCC.B)
- BitFarms (TSXV:BITF)
- Hive Blockchain Technologies (TSXV:HIVE)(NASDAQ:HVBT)
- Hut 8 Mining (TSXV:HUT)(NASDAQ:HUT)
The Bitcoin ETF
Purpose Bitcoin ETF is North America’s first Bitcoin ETF, which started trading on the TSX in February. Like a gold ETF, Purpose ETF has bought and stored around 21,206 Bitcoins in a safe wallet. Think of it like a treasure, and the ETF gives you exposure to the price of this treasure for a 1% management fee. The ETF price is determined by the BTC price and the demand of the ETF. Hence, the ETF fell 6% this week after surging 56% from July 20 to September 3, when the BTC price surged 60%. This gap reflects the ETF demand on the TSX.
Crypto mining stocks
Investing in crypto mining stocks is a better alternative. They are companies that have data farms and high-performance computing capacity. Hut 8 Mining gives you similar exposure as the ETF. But unlike the ETF, Hut mines Bitcoin, which reduces its cost per BTC. Its cost per BTC is $3,000, and BTC is trading above $46,850 after the dip. Hence, Hut stock surged 175% during the rally from July 20 to September 3.
Then there are blockchain technology firms like BitFarms and Hive. Blockchain is a global decentralized ledger. In this technology, all network participants in the blockchain have access to the ledger. They validate a transaction and update it on all computers connected to the network. This makes it difficult to hack or tamper with the ledger. Owners of the account are kept secret, unless they decide to reveal their identity.
Every tech giant from Microsoft to IBM is exploring the potential of blockchain in applications that need high transaction security like voting, real estate processing, and medical data sharing. Hive and BitFarms are capable of powering these applications once they become scalable. In the meantime, they also mine Bitcoin and have an inventory of it. That inventory serves the purpose of a BTC ETF.
Hive is already investing in blockchain startups. It is also exploring the use of its computing capacity in applications like artificial intelligence and rendering.
The above four stocks will give you complete exposure to the crypto trend. But don’t invest a fortune in them as crypto is highly volatile. A Fool always hedges their portfolio with dividend and resilient stocks.