Sunday April 11, 2021
It doesn’t always have to be Bitcoin
How to invest in crypto stocks
By Benjamin Feingold
Tesla is known for not hesitating for long, but for creating facts – not just with electric cars but with Bitcoin. There are opportunities for investors to participate in the hype – without buying the cryptocurrency directly.
In mid-March the time had come: after several attempts, the Bitcoin climbed over $ 60,000 for the first time. Since the fall of last year, apart from brief interruptions, things have risen sharply, when around 10,000 dollars were still being asked for. Bitcoin thus leads the ranking by far: the total value of all coins is around 1.8 trillion dollars, while Bitcoin accounts for just under 1.1 trillion dollars. To classify: Ether as the second largest currency only comes to $ 230 billion.
From the point of view of Bitcoin fans, the 60,000 mark that has now been reached is only a stopover on the way to significantly higher prices. The prominent developer of the stock-to-flow model, Plan B, sees up to $ 500,000 possible by the end of the year. There are hardly any upper limits. A similar phenomenon can be seen here as on the stock market: only those who issue unimaginable price targets will still be noticed and make headlines.
As an investor, on the other hand, you should take a deep breath and not get infected by the enthusiasm. It is well known that fear and greed are not good advisors in the financial markets. There is no doubt that the outlook for Bitcoin has brightened in the past few months. Tesla initially bought coins for 1.5 billion dollars and has also been offering Bitcoin payments when buying its electric cars since the end of March. A good marketing prank that fits the picture.
Institutional investors buy bitcoin
It is also optimistic that institutional investors are increasingly taking hold. The New Zealand pension fund KiwiSaver invested around five percent of its assets in Bitcoin. For weeks there have been persistent rumors that the important Singaporean sovereign wealth fund Temasek is already involved. “A ban on Bitcoin and other cryptocurrencies is becoming increasingly unlikely and would hardly be enforced,” says Gil Shapira, chief strategist at the broker eToro. “Bitcoin is increasingly in competition with gold and seen as an instrument for hedging against inflation,” says Shapira.
The next price driver is already in sight: the asset manager Fidelity recently submitted an application for an exchange-traded Bitcoin fund. If the supervisory authorities give the green light, massive inflows of funds could be expected.
However, the fluctuations should not be underestimated either. Since the beginning of the year there have been several sharp setbacks within a short time of 20 to 30 percent. If you get sleepless nights like this, you should keep your hands off Bitcoin and switch to alternatives.
These are the Bitcoin alternatives
Above all, some technology companies benefit from the hype surrounding cryptocurrencies through their business models or products. NVIDIA and AMD produce the necessary graphics cards, which in turn are a prerequisite for mining Bitcoins and other digital coins. The largest digital coin holders include Microstrategy, Tesla, Square, Marathon Digital Holdings, and Galaxy Digital Holdings. PayPal has also entered the coin business as a payment service provider.
Those who want to invest in German companies will only find what they are looking for in the small cap segment. An alternative to the US crypto exchange Coinbase is the Bitcoin Group. By far the largest operator of a Bitcoin exchange in German-speaking countries reported a jump in sales and profits for the 2020 financial year in mid-March. Advanced Blockchain AG from Berlin has made a name for itself in the field of blockchain development companies in this country. Blockchain is the basis for Bitcoin. It is a forgery-proof, public database that enables numerous other applications in addition to Bitcoin.
Benjamin Feingold operates the stock exchange portal Feingold Research.
This article does not constitute a recommendation to buy or sell individual stocks, ETFs, certificates or other investment products. No liability is assumed for the correctness of the data.
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