As the saying goes, there’s always a bull market somewhere. And in 2021 nowhere is that idea more important than in digital assets. But in a cryptocurrency market made up of risk-assets of all kinds, let’s take a look at three names poised to do better than the Jones going forward.
Cryptocurrencies. Digital assets. Alt coins. Blockchain. Without splitting hairs over names associated with an emerging cryptocurrency market and its tethered technologies, it’s enough to know it’s been an insanely hot investment theme this year. Leading or rather, still guiding cryptos of all kinds higher, is Ethereum (CCC:ETH-USD).
ETH-USD and what many see as the world’s computer for cryptos is up a hefty 263%. Suffice it to say and without having to do the simple math, that’s head and shoulders above returns offered in more traditional portfolios holding the Dow Jones Industrials or a blue-chip constituent like Apple (NASDAQ:AAPL) or Home Depot (NYSE:HD). And mind you, it’s been a nice year for those investors too. It hasn’t been without risk, though.
To walk the aisle, cryptocurrencies, in all of its various forms, are prone to price corrections. And it can happen at the drop of a hat. They’re risk-assets. Cryptos are also the type which stomach-churning volatility is best prepared for in advance of any unwanted reminders of that very fact.
Recent cryptocurrency leaders Riot Blockchain (NASDAQ:RIOT) or Dogecoin (CCC:DOGE-USD) are a couple testaments to when the crowd’s collective cheers quickly turn into panic and jaw-dropping jeers. Possibly worse, the reality is some of today’s digital mainstays like RIOT or DOGE may never recover.
- Amplify Blockchain Leaders ETF (NYSEARCA:BLOK)
- Square (NYSE:SQ)
- Grayscale Bitcoin Trust (OTCMKTS:GBTC)
As with any emerging market, leadership at any given moment is not a guarantee of future returns as Wall Street’s boilerplate warnings stress to investors on a daily basis. Still, today let’s examine three crypto plays that are likely here to stay and sporting price charts where the rewards smartly outweigh the risks.
Cryptocurrency: Amplify Blockchain Leaders ETF (BLOK)
Source: Charts by TradingView
The first of our cryptocurrency plays is the Amplify Blockchain Leaders exchange-traded fund (ETF). This liquid and actively-managed ETF’s portfolio consists of a diverse group of smaller and large-cap plays within the digital asset market. Roughly 45% of BLOK’s risk is situated in 10 stocks. Among those, fintech PayPal (NASDAQ:PYPL) is the largest at $311 billion and MicroStrategy (NASDAQ:MSTR) the oldest with operations dating back to 1989.
Technically and regardless of whether investors’ call BLOK stock an irregular W or triangular base, the forecast is bullish. Today and as the weekly chart of this cryptocurrency stock reveals, shares are offered just above confirmed pattern support.
With stochastics oversold but not yet bullishly aligned, a show-me-the-money long position without taking on the entirety of the pattern’s downside risk makes sense. In our estimation, one way to gain that kind of exposure is the June $55/$65 bull call spread rather than owning BLOK stock.
Source: Charts by TradingView
Square is the next of our cryptocurrency stocks to buy. SQ stock is much more than a play on the growth of digital assets. It’s already an extraordinarily successful and disruptive fintech whose early adoption of this market is another feather in its quiver for long-term shareholder value.
Another feature hinting at nearby better-than-average good fortune for SQ stock investors is the price chart. As the provided weekly view shows, shares of Square are carving out a corrective bullish W base. A handle consolidation now in its third week of development sets up a nearby breakout entry.
Alternatively, approaching this cryptocurrency today with a SQ stock collar strategy seems reasonable. With Square’s handle confirming a pivot low this week and earnings in early May, a collar position offers the opportunity for unusually quick gains, while controlling and taking advantage of any potential adverse reactions in shares.
Cryptocurrency: Grayscale Bitcoin Trust (GBTC)
Source: Charts by TradingView
Grayscale Bitcoin Trust is the last of our cryptocurrency stocks to buy. The Bitcoin (CCC:BTC-USD) proxy is a heavily traded alternative to owning the market’s largest digital asset which has surpassed a $1 trillion valuation this year. That may be reason enough for owning GBTC. But there’s more too.
For investors that seek to position in round lots of 100 shares or more, GBTC’s lower price tag of about $46 compared to BTC’s $54,750 is important. Shares are also easily purchased within traditional online brokerage accounts for stock trading. And if that’s not reason enough to own this cryptocurrency, you’re also in good company in buying GBTC.
Ark’s Cathie Wood currently owns 7.6 million shares of GBTC inside its Ark Next Generation Internet (NYSEARCA:ARKW) fund. Wow! And given the investment manager’s deserved reputation as one of the street’s most savvy players and ownership accounting for a meaningful 5% of ARKW’s risk, there’s a lot more to like regarding GBTC than not.
Technically, this cryptocurrency is set up as a double-bottom or W base purchase. Shares have formed the pattern off Bitcoin’s 2017 all-time-high and layers of Fibonacci support tied to three critical lows established over the past year.
Today, all that’s missing is price confirmation through last week’s hammer high of $48.21. Ok, that’s not entirely true. Options on GBTC are also missing. As much and if you’re not already in it to win it, cheating with an early purchase isn’t recommended. And thereafter? Keeping that exposure away from the risk of ruin or smaller but painful margin calls makes a great deal of sense.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in listed Grayscale Bitcoin and Ethereum stocks (GBTC, ETHE and ETCG), but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.