No matter where you stand on cryptocurrencies, you cannot deny their “it factor.”
Thanks to the sector’s unprecedented profitability, several bitcoin millionaires were made overnight last year. Still, traditional investors find this virtual market difficult to stomach. As a result, the concept of bitcoin stocks, or companies that indirectly benefit from the rising bitcoin price, became popular.
Browse the internet on this topic, and you’ll inevitably find financial analysts urging their readers to invest in bitcoin’s underlying blockchain technology, not in bitcoin itself. In the spirit of total transparency, I find this argument somewhat shortsighted. It’s also a bit of a cop-out for those who want to have their cake and eat it too.
Imagine if an analyst told you to avoid Ford (NYSE:F) — or any other automaker — but to instead “invest in cars.” Those who advocate buying blockchain and not bitcoin are speaking words, but not really saying anything at all.
That’s because bitcoin, or the major alternative-cryptos, represent the blockchain’s ultimate, practical facilitation. The blockchain doesn’t clean your room, nor does it cure cancer. Instead, at its root, the blockchain substantially improves data management. In fact, it improves data management so dramatically that you can use the technology to create an entirely new currency.
That’s bitcoin. And that’s why the never-bitcoiners have it all wrong. The best way to invest in the blockchain is to invest in cryptocurrencies.
Still, if you are hellbent on avoiding direct crypto investments, you can always elect stable companies that utilize blockchain technologies. Here are four bitcoin stocks to consider, even if you hate bitcoin!
Bitcoin Stocks to Consider: Paypal (PYPL)
Those who either hate or are otherwise scared of bitcoin should consider Paypal (NASDAQ:PYPL). As a digital-payments processor, Paypal is one of the most relevant bitcoin stocks available in the market. With increasing numbers warming to the idea of digital payments, cryptocurrencies offer a natural progression.
But more importantly, PayPal adopted the crypto platform early on. In 2014, the company closed a deal with three bitcoin-payment processors: BitPay, Coinbase and GoCoin. This enabled PayPal merchants to accept customer payment with cryptocurrencies. Not only that, management affirmed their belief in the “blockchain economy.” They bluntly stated that their bitcoin interest “runs more than skin deep.”
Plus, I’m loving PayPal’s huge upside potential. Despite this year being a tough one for several companies, PYPL shares are up nearly 14%. This follows a nearly 83% return in 2017. Clearly, momentum still exists for this company.
While other bitcoin stocks fail to provide much excitement, PYPL has the ideal mix between stability and profitability.
Bitcoin Stocks to Consider: Square (SQ)
From an investor’s perspective, entrepreneur and all-around genius Jack Dorsey is a mixed bag. I’m pleased as punch that he leads Square (NYSE:SQ), which in my humble opinion is a true disruptor. Those quirky little credit-card swipers may look funny, but they have sparked a commerce innovation.
And how is SQ not a perfect complement to bitcoin? Cryptocurrencies have put all interested parties on a level playing field: if you want to invest in this sector, you can do so on your time and at your leisure. In the same manner, Square’s payment device and app provide small businesses with tools previously accessible only to larger companies.
That said, Dorsey also heads Twitter Inc (NYSE:TWTR). Finally, the company has convinced several analysts that its recovery story is for real. But the problem is that social media is a fickle industry. TWTR is believable, but it has risks as well.
I’m not so concerned about SQ, and ultimately, I see both Square and bitcoin charging forward. A few months ago, Bloomberg reported that more than half of its customers are willing to accept bitcoin.
That’s all I need to hear. Be sure to put SQ on your list of must-watch bitcoin stocks.
Bitcoin Stocks to Consider: Nvidia (NVDA)
You might be the type of person to never once consider cryptocurrency investments. But if you have any interest at all in technology and the future, Nvidia (NASDAQ:NVDA) is your best bet. This is the company that literally does it all. Whether it’s developing data-center equipment, deep learning and artificial intelligence, and driverless technologies, Nvidia is a true dynamo.
But as one of the top bitcoin stocks, NVDA plays a critical role in the blockchain economy. To condense an extremely long and complicated explanation, cryptocurrencies are actually “reward tokens” for verifying data blocks in the blockchain. Receiving these tokens, though, is a tough endeavor. Typically, only the first verifier, or “miner,” gets the reward.
As you might imagine, crypto-mining is a computer-intensive process. To make mining profitable, miners need the fastest processors. It’s no surprise, then, that NVDA produces some of the best processors available.
Of course, being the best isn’t cheap. If you want an alternative to Nvidia, another one of the bitcoin stocks to consider is Advanced Micro Devices (NASDAQ:AMD). While much more wild than NVDA, AMD shares are on a tear this year.
If you’re looking for bitcoin stocks that represent direct, blockchain exposure, you can’t go wrong with either NVDA or AMD.
Bitcoin Stocks to Consider: Bitcoin Investment Trust (GBTC)
I realize that the Bitcoin Investment Trust (OTCMKTS:GBTC) is a controversial pick. Among bitcoin stocks, the GBTC truly earns that name. This also makes the GBTC a particularly eyebrow-raising idea in that this list is for bitcoin-haters. But please allow me a minute or two to explain myself.
One of the biggest reasons why traditional investors don’t consider cryptocurrencies is the fear of the unknown. Admittedly, bitcoin has several variables with which several folks are simply not comfortable. Even recently, we’ve witnessed crypto-exchange hacks and other security vulnerabilities. Plus, bitcoin is very unforgiving in mundane issues such as forgetting passwords.
Finally, there’s always the risk that a major exchange or service can go belly-up. It happened to Mt.Gox, and it can happen again.
With the GBTC, it eliminates several of these “extracurricular” risk factors. What you’re left with is a bitcoin investment that’s mostly vulnerable to market risk. Granted, that risk is huge when you’re dealing with cryptocurrencies.
But at least you the Bitcoin Investment Trust offers peace of mind that other crypto-based investments cannot.
As of this writing, Josh Enomoto is long bitcoin.
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