Bitcoin is fast gaining acceptance as an alternative form of asset class. According to research reports, 46 million Americans, which is 22% of the adult population, have exposure to Bitcoin, while the number of blockchain wallet users has touched 77.43 million in October 2021, up from just one million at the start of 2014.
An investment of $1,000 in Bitcoin five years back, would be worth close to $90,000 today, and these gains would be exponentially higher if we extend our timeline. At the time of writing, the price of one Bitcoin is trading at US$61,400, valuing the most popular cryptocurrency at a market cap of US$1.15 trillion. According to Bitcoin bulls, the digital asset might even be valued at a market cap of US$100 trillion in the future, accounting for a significant portion of total global assets.
If you are bullish in the cryptocurrency space and want to invest in this highly disruptive asset class, you can do so in multiple ways.
Buy Bitcoin on a leading cryptocurrency exchange
Canadians can buy and hold Bitcoins on a cryptocurrency exchange such as Wealthsimple Crypto or Coinsmart. There are multiple cryptocurrency exchanges that have been launched over the years, and the investor can compare relevant platform fees or commissions to make an informed decision.
Buy Bitcoin ETFs
Canada has also launched several Bitcoin ETFs or exchange-traded funds (ETFs) in recent months, such as Purpose Bitcoin ETF, Evolve Bitcoin ETF, and CI Galaxy Bitcoin ETF. These ETFs will replicate Bitcoin gains, and the difference in total returns will be limited to the management fee collected by these ETFs. The ETFs can be held in registered accounts such as the TFSA or RRSP, which suggests investors can benefit from tax-free gains as well.
Buy shares of companies that invest in Bitcoin
In the last 18 months, several companies have bought Bitcoin and held it on their balance sheets. These include mid-cap software firms such as MicroStrategy or trillion-dollar heavyweights such as Tesla. Fintech companies such as Square and PayPal have also invested in Bitcoin.
Buy crypto mining companies
Another passive way to invest in Bitcoin is buying shares of companies that mine the cryptocurrency such as Hut 8 and Hive Blockchain Technologies. The stock prices of crypto-mining companies are closely related to the prices of the currency they mine. For example, shares of Hut 8 Mining have returned 385%, while Hive stock is up 4,270% in the last five years.
Buy shares of cryptocurrency exchanges
Investors can also look to buy shares of cryptocurrency exchanges such as Coinbase and Robinhood. While Coinbase is a pure-play crypto exchange, Robinhood has recently entered the cryptocurrency trading space but derives a significant portion of revenue from this vertical.
Generally, in a bull run, higher trading volumes positively impact revenue. In a bear run, trading volumes decline at an alarming rate, hurting the top line as well.
But the increase in the number of crypto investors or traders in the future might help exchanges to offset lower volumes, making these stocks solid long-term bets for crypto and growth investors.