Here is a less risky way to bet on cryptocurrencies, via the Stock Exchange | Investing.com

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  • Cryptocurrencies in a bad patch since November 2021
  • Buying on bad corrections turns out to be the optimal approach
  • Many investors are not comfortable with cryptocurrency wallets.
  • BITQ is a stew of cryptos
  • BITQ should follow Bitcoin and cryptocurrency prices.

Turning a five cent investment into over $31,500 in 12 years is amazing in any market. If you had spent $1 on Bitcoin in 2010 and kept it, today you would have the tidy sum of $630,000. Such returns are not to be despised. And at the November 2021 high, that $1 would have been worth $1.38 million.

While some high-profile followers see cryptocurrencies as the medium of exchange of the future, critics are calling this asset class evil and worthless. Passions run high on both sides, which contributes to price volatility. Meanwhile, more and more analysts and financial advisors are recommending a small exposure to the asset class.

As investors and speculators seek to transfer a certain percentage of their nest egg into this burgeoning arena, there are several ways to participate. The most direct route is to buy tokens, but there are over 19,670 cryptocurrencies to choose from. Also, after buying a cryptocurrency, the next question is whether to keep it in a wallet in cyberspace or on an exchange that acts as a depository.

Exchange-traded companies and ETFs that move up and down based on the value of cryptocurrencies now offer an alternative. These products eliminate custody issues because they can be placed in traditional wallets.

I like to call the Bitwise Crypto Industry Innovators ETF (NYSE:) a stew of Cryptos because it holds a variety of companies that have buy exposure to the asset class.

Cryptos have been trending negative since November 2021

On November 10, 2021, and , the two cryptocurrencies that account for more than 60% of the total asset class’s market capitalization, reached all-time highs. On the day they hit those highs, they closed the session below the previous day’s low, setting up key bearish reversal patterns on the daily charts – an ominous sign.

Source: Barchart

The chart shows bitcoin trending towards lower highs and lows. As of May 31, the price was not far from the May 12 low.

Ethereum D1

Source: Barchart

Ethereum has followed the same path but has fallen even more than Bitcoin in percentage terms since mid-November 2021. Ethereum hit another low on May 27.

Buying during disastrous corrections has been the optimal approach

The long-term charts show that buying during periods of price carnage has been a profitable strategy over the past few years.

Bitcoin M1 long term

Source: Barchart

Bitcoin’s long-term chart shows the up and down trend in the price of the major cryptocurrency.

Ethereum M1 long term

Source: Barchart

Ethereum has exhibited a similar pattern of large price swings over the past few years.

Many investors are not comfortable with cryptocurrency wallets

One of the hurdles newcomers to the cryptocurrency arena face is the difficulty in storing or holding tokens. Cryptocurrency wallets can store tokens, and owners have access to them through passwords. However, the horror stories of lost password keys that caused millions of losses have been a downside.

Block (NYSE:), formerly called Square, is working on a cryptocurrency wallet it has dubbed “rock” that could make future market participants more comfortable with backup procedures.

In the meantime, many cryptocurrency investors and traders choose to leave their tokens with exchanges. Coinbase (NASDAQ:) recently spooked some customers by revealing that they could lose their tokens if the exchange files for bankruptcy.

In short, custody and security continue to be barriers to expanding the addressable cryptocurrency market.

BITQ is a stew of cryptocurrencies

Many investors limit their activities to assets they can hold in traditional stock portfolios. The arrival of ETFs and ETNs has broadened the market for alternative investments in recent years.

The VanEck Gold Miners (NYSE:) ETF is an example of a product that has increased market participation by . Prior to GDX, investors and traders had to choose between physical metal, futures, or mining stocks. GDX is a product that holds physical gold and correlates well with the ups and downs in the price of the precious metal.

The Bitwise Crypto Industry Innovators ETF (BITQ) is a product that holds stocks of companies that are moving up and down with cryptocurrency. Enterprise analytics software maker MicroStrategy (NASDAQ:) is the fund’s largest holding, followed by Galaxy Digital Holdings (TSX:), Coinbase, Silvergate Capital (NYSE:) and mining equipment maker cryptocurrency Canaan (NASDAQ:) rounding out the top five positions.

Other BITQ holdings include:

BITQ holdings

Source: Barchart

At $8.88 per share on May 31, BITQ had $60.663 million in assets under management. This ETF trades an average of 145,414 shares per day and charges a management fee of 0.85%. The last mixed dividend was $0.65, which corresponds to a yield of 7.32%.

BITQ should follow the course of bitcoin and cryptocurrencies

BITQ entered the market on May 12, 2021, at $24.69 per share.

BITQ D1

Source: Barchart

The chart shows a 64% drop to $8.88 on May 31. Over the same period, bitcoin fell from $56,915.26 to $31,600, a decline of 44.5%. BITQ underperformed the major cryptocurrency as speculative interest waned. A rally in bitcoin and other cryptocurrencies would likely cause BITQ to follow. Time will tell if underperformance during bearish periods translates into outperformance during uptrends.

BITQ is an option for market participants seeking exposure to the upside of the cryptocurrency asset class. BITQ owns a diverse portfolio of cryptocurrency-related companies that trade on exchanges, making it a bitcoin theft.

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Here is a less risky way to bet on cryptocurrencies, via the Stock Exchange | Investing.com


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