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Crypto Stocks CFDs Explained: Cryptocurrency Stocks Guide

Date Modified: 19/05/2024

One of the most talked-about market sectors in recent times has undoubtedly been the world of cryptocurrencies, but did you know that this sector is not limited to trading the digital coins themselves? Shares of crypto-related public companies have been growing in popularity, so let’s dive into this fascinating corner of the Stock CFD market:

An illustration of Crypto stocks CFDs

What Are Crypto Stocks?

Crypto stocks are shares of companies that are involved in some way with the growing cryptocurrency sector. While cryptocurrencies themselves are not tracked on traditional indices like Wall Street’s Nasdaq (US-TECH 100) or S&P 500, firms that operate digital coin trading platforms, are involved in crypto mining, or have investments in this market sphere often are. These companies related to the crypto market may be susceptible to the ups and downs which this relatively new economic sector is often characterised by, but stock CFD traders interested in the crypto industry might wish to learn more. Let’s dive in:

Types of Crypto Stocks

Publicly-traded companies related to digital currencies have been growing in popularity in tandem with the steep rise in crypto values. In March of 2024, headlines were made around the world as Bitcoin reached its highest level ever of over $73,000. While this may have spurred many market watchers to trade cryptocurrencies, this is not the sole possibility for those wishing to take part in these market movements.

CFDs on cryptocurrency-related shares and ETFs represent, via their underlying assets, the intersection between more traditional forms of trading and the burgeoning world of digital currencies and blockchain technology.

Diving into the realm of these CFDs unveils a diverse landscape, encompassing entities ranging from crypto exchanges and mining companies to broader technology firms with significant exposure to the digital asset space.

  • Exchange-Traded Funds (ETFs): Exchange-traded funds have emerged as a popular vehicle for investors seeking exposure to cryptocurrencies while sidestepping the complexities associated with direct ownership. These funds come in two primary forms: spot ETFs and futures ETFs.

    Spot ETFs directly mirror the real-time market prices of cryptocurrencies, providing investors with immediate exposure to digital assets' fluctuations. Recent regulatory approvals in the United States have ushered in a new era of spot cryptocurrency ETFs, including offerings from reputable asset managers like BlackRock (BLK).
    Conversely, futures ETFs are anchored in futures contracts for cryptocurrencies, speculating on future price movements rather than mirroring current market prices. This subtle yet significant difference underscores the importance of understanding the nuances between spot and futures ETFs before making investment decisions.

  • Crypto Industry Stocks: Companies falling under this umbrella are deeply entrenched in the cryptocurrency ecosystem, with their core business operations revolving around activities such as crypto exchanges and mining. Crypto exchanges serve as vital conduits for buying, selling, and trading cryptocurrencies, shaping the market's liquidity and accessibility. Meanwhile, crypto mining companies play a crucial role in maintaining blockchain networks by providing the computational power necessary for transaction processing and network security.

    Prominent examples in this category include Coinbase, a leading global crypto exchange, and Marathon Digital, a key player in Bitcoin mining operations.

  • Crypto-Adjacent Stocks: Crypto-adjacent stocks encompass companies with significant ties to the cryptocurrency space, albeit not as their primary focus. These firms may operate in sectors such as technology or finance, leveraging their engagements or investments in cryptocurrencies to bolster their stock performance.

    Graphics Processing Unit (GPU) manufacturers exemplify one facet of crypto-adjacent stocks, as their products play a pivotal role in cryptocurrency mining. Additionally, companies like MicroStrategy and PayPal (PYPL) have integrated crypto-related services into their offerings or hold substantial cryptocurrency reserves, aligning their fortunes with broader crypto market trends.

Understanding the distinctions among these categories is essential for investors navigating the complexities of the CFD market. Each category offers a distinct avenue for exposure to the digital currency space, with varying degrees of risk and growth potential. As the cryptocurrency landscape continues to evolve, informed investment decisions will be paramount in harnessing the sector's opportunities as they are reflected in the CFDs made available for trading, while always taking into account the associated risks.

Trading Cryptocurrency Stocks: How to Trade Crypto Stocks

After deciding to try your hand at trading CFDs on crypto-related shares, there are just a few simple steps you need to take to get started:

  1. Choose your trading method.
  2. Learn about the share market.
  3. Open and verify your Plus500 account.
  4. Plan your Shares trading strategy.
  5. Start trading.

Leading Crypto Stocks in 2024

Among players in this growing sector, a few prominent companies are especially worthy of note. Let’s take a closer look at three share CFDs available* on the Plus500 trading platform:

  • Marathon Digital Holdings (MARA)
    This Florida-based firm is heavily involved in the crypto-mining industry. Marathon Digital was founded in 2010, and quickly began growing. Marathon completed the purchase of more than $150 million worth of Bitcoins, and as of 2023, was in possession of over 200,000 mining rigs, which use complex mathematics to create digital currency. The company’s Montana data centre also runs on coal-generated energy from a nearby mine, creating an interesting connection between one of the oldest and a much newer form of ‘mining.’ On the day following its February 28th, 2024, Q4 earnings call, Marathon experienced a 16% drop in share price.

  • MicroStrategy (MSTR)
    MicroStrategy is an American company mainly focused on business intelligence and software, but its executive suite has led forays into the cryptocurrency sphere in recent years. Since 2020 and as of early 2024, MicroStrategy has purchased billions of dollars worth of Bitcoin as an inflation hedge, financed partially via the sale of convertible notes. Despite an almost 170% rise in share price over the first three months of 2024, MicroStrategy’s corporate strategy has exposed it to significant losses stemming from the volatile nature of the cryptocurrency market. The opinions of many savvy market watchers that the firm’s share price was inflated with regard to the price of Bitcoin led to a wave of short-selling and a large financial loss for MicroStrategy in April 2024.

  • Coinbase (COIN)
    Coinbase, an American company, owns and operates a digital platform for the trading of digital currencies. In April of 2021, the firm went public and counts more than 40 million across the globe among its customers as of 2024. However, Coinbase has also been subject to significant regulatory difficulties. In 2023, the United States Securities and Exchange Commission (SEC) filed suit against Coinbase, alleging activities that violated American regulations. Despite this increased scrutiny stateside, it was estimated in 2024 that over 10% of the world’s crypto assets were held on this firm’s platform, and its share value saw a 41% increase from January 1st to April 12th, 2024.

  • Riot Platforms (RIOT)
    This firm operates Bitcoin mining projects in the American state of Texas as well as an engineering and fabrication concern in Colorado. Founded in 2017, Riot Platforms has also expanded via acquisition of other companies in the cryptocurrency and blockchain technology fields.

  • CleanSpark (CLSK)
    Cleanspark is another company specialising in crypto mining operations, with data centres mainly located in Georgia in the southern U.S. In February 2024, this firm’s share price benefitted from a general rise in crypto-related stocks in the wake of Bitcoin’s two-year high.

  • Hut8 Corp (HUT)
    Hut8 specialises in the infrastructure utilised in crypto mining operations, and as of April 2024 has a market capitalisation of over $600 million. In addition to its key data centres located in Canada, the firm has also made forays into the growing fields of artificial intelligence and machine learning.

  • Bitfarms Ltd (BITF)
    This company operates data centres related to Bitcoin mining across North America as well as Argentina and Paraguay to the south. In the spring of 2024, Bitfarms expanded its mining machine inventory, with the stated goal of making the most of crypto value increases ahead of mining hardware potentially becoming more expensive.

*Availability Subject to Regulation

Benefits and Risks of Trading Crypto Stocks CFDs

Investing in cryptocurrency-related stocks offers a unique advantage due to their diversified nature. Unlike pure cryptocurrency investments, these stocks provide exposure to the industry while also incorporating other business operations, thereby spreading risk. This diversification shields investors from the extreme volatility inherent in cryptocurrencies, where fluctuations can significantly impact the revenue and earnings of associated companies.

The growing mainstream acceptance of cryptocurrencies further enhances the appeal of crypto stocks. For instance, some firms are already moving toward acceptance of mortgage payments in the form of digital coins. This mainstream integration is expected by many experts to drive continued momentum in the crypto stock market as more companies embrace blockchain technology and digital currencies.

However, investors must always remain vigilant about regulatory developments. The evolving regulatory landscape surrounding cryptocurrencies can impact market dynamics and influence investment decisions. While crypto stocks offer exposure to the burgeoning digital asset space, regulatory uncertainties necessitate careful monitoring. As with all spheres of CFD trading, the risk of significant financial losses is ever-present when trading on crypto-related shares.

Despite regulatory concerns, many investors view crypto stocks as suitable investments in the digital currency realm. These stocks not only provide exposure to cryptocurrencies but also encompass substantial business operations beyond the crypto sector. Consequently, they are often perceived as a more sensible investment alternative compared to purchasing cryptocurrencies directly, particularly amid ongoing regulatory flux.

As regulatory frameworks continue to shift, crypto stocks may continue to offer attractive opportunities for investors seeking exposure to the dynamic cryptocurrency market. Despite this, this relatively new market sector is characterised by high levels of volatility and the horizon for crypto stocks is far from certain for traders and investors alike.

Conclusion

In conclusion, the world of cryptocurrencies has expanded beyond the digital coins themselves, offering investors a diverse array of opportunities through cryptocurrency-related stocks. These stocks provide exposure to the burgeoning cryptocurrency sector while incorporating other business operations, thus diversifying risk and shielding investors from the extreme volatility associated with pure cryptocurrency investments.

The mainstream acceptance of cryptocurrencies, evidenced by companies like United Wholesale Mortgage accepting Bitcoin for mortgage payments, indicates a growing integration of digital currencies into traditional financial systems. This integration is poised to drive continued momentum in the crypto stock market as more companies embrace blockchain technology and digital assets.

As with any investment, trading cryptocurrency-related stocks via CFDs carries inherent risks, including the potential for significant financial losses. While the future of crypto stocks holds promise, the market's high volatility and regulatory uncertainties underscore the need for careful consideration and informed decision-making.

FAQs

How can you trade on Crypto stocks?

You can trade on Crypto stocks through Contracts for Difference (CFDs) offered on the Plus500 platform.

What are the different Cryptocurrency stocks?

Different types of Cryptocurrency stocks include exchange-traded funds (ETFs), companies directly involved in crypto exchanges and mining, and those with significant investments in the crypto space.

Are Crypto stocks a good investment?

Whether Crypto stocks are a good investment depends on individual risk tolerance, market conditions, and regulatory factors, so thorough research and consideration are essential.

Are Crypto stocks more volatile than traditional stocks?

Yes, Crypto stocks tend to be more volatile than traditional stocks due to the inherent volatility of the cryptocurrency market and the evolving regulatory landscape.

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