Bitcoin, Ether, and many other cryptocurrencies have been all the rage these days, especially amid higher levels of inflation. While some view Bitcoin as the new gold, its limited history versus gold leaves the asset class in a haze of uncertainty. Undoubtedly, crypto is more volatile than gold and hasn’t done the best job of retaining its value during market-wide meltdowns. The 2020 stock market crash mostly spared gold, but Bitcoin crumbled like a paper bag — far worse than many stocks. Indeed, it can be tough to get behind Bitcoin and all the sort if you don’t have a stomach that’s made of steel.
Cryptocurrencies can help you further diversify your portfolio, but be careful!
For young, venturesome investors who seek greater diversification, it’s worth checking out Bitcoin and all the sort with a small percentage of your wealth (think 1-5%). But please do understand that Bitcoin can shed a considerable amount of its value overnight. Bitcoin and the broader crypto space can be cyclical. We’re in a boom now, but there’s no telling how long it will take for Bitcoin to regain its ground come the next drastic pullback, like the one endured in the back half of 2017. It took three years and a horrific crisis for Bitcoin to recover. Given Bitcoin is multitudes higher than it was back in its late-2017 peak, it’ll be an even more arduous road to recover should Bitcoin go bust once again.
Also, there’s no telling if Bitcoin will even recover this time around, given the gains that are now already in the rear-view mirror. For those seeking to get rich, there are better ways to invest. That said, for those willing to deal with the possibility of losing a massive, unfathomable percentage of one’s principal, only then would I recommend getting into Bitcoin. It is a mysterious asset in many ways. Its low correlation to the broader stock market is a top reason to own it as part of a diversified portfolio.
How to bet on Bitcoin? Two great ways
That said, one should not expect such a low correlation to persist under all circumstances, most notably times of shock or crisis. Come the next market crash, I have no idea if Bitcoin will crash harder, dampen the blow, hold its own, or rally.
If you’re still keen on the asset and are fully aware of the risks, there are two great ways to bet on Bitcoin in Canada without having to go through the trouble of opening a wallet. If you can trade stocks, you can expose yourself to Bitcoin via a number of Bitcoin ETFs like the Purpose Bitcoin ETF (TSX:BTCC.B), or, if you’re especially bullish on crypto as a whole, HIVE Blockchain Technologies (TSXV:HIVE)(NASDAQ:HVBT) may be a higher upside bet for those willing to take on the associated risks. With the latter play, one should only bet what they’re comfortable parting with. Miners are a leveraged ways to play a commodity.
While I’m not against a Bitcoin ETF, which provides more security than holding actual Bitcoin in a wallet, I’d favour HIVE stock, given you won’t be on the hook for 0.4-1% MERs and a greater degree of diversification among cryptos beyond just Bitcoin. Further, HIVE mines crypto in some of the coolest parts of the world, with lower energy costs than your average miner. Much of the negativity surrounding Bitcoin has been surrounding power consumption. HIVE is a more efficient miner, and it’s poised to become even more power efficient with time.