How Crypto Is Entering Traditional Finance
When people want to invest in crypto, the first thing that comes to mind is cryptocurrencies. At the end of the day, cryptocurrencies are the main element of the crypto industry. However, aside from placing capital in digital assets, there are other ways to invest in the industry. In this article, we will be looking at an alternative way of investing in cryptocurrencies: through ‘crypto stocks’.
Crypto stocks are stocks listed on various traditional stock exchanges. Usually, the firm behind the traded crypto stock bears significant ties in some way or another to the crypto industry. There is a wide range of cryptocurrency stocks available for trade, from mining companies to cryptocurrency exchanges.
Currently, the most well-known cryptocurrency stock is 'COIN’. COIN is the ticker symbol of Coinbase, which is one of the largest cryptocurrency exchanges in the world.
Coinbase stock (COIN)
Coinbase launched its Initial Public Offering (IPO) in April 2021. It became the first cryptocurrency exchange to be listed on the NASDAQ stock market. The listing of COIN on NASDAQ is a true testament to the rapid rate of innovation the cryptocurrency industry has experienced over the years.
COIN correlation to the stock market
Unfortunately, since Coinbase’s IPO in April 2021, its COIN stock has performed poorly in comparison with the NASDAQ100. This is due to the fact that COIN follows the general direction of the crypto market despite also being influenced by the traditional stock market. And since COIN's NASDAQ listing, the cryptocurrency market had experienced losses across the board. Consequently, COIN has also suffered major losses. Furthermore, the downward fluctuations of the stock market have also impacted COIN's performance, leading to its decrease in price. This is depicted in the table below:
COIN / USD vs NASDAQ100 / USD trend comparison
COIN correlation to the stock market
As previously stated, the losses seen by the cryptocurrency market have triggered a negative price action for COIN, as the stock fluctuates along with the volatility of digital assets. In fact, when comparing BTC/USDT and COIN/USD charts, one can see that they are highly correlated.
From April 2021 to October 2021, BTC has only seen a price increase of 6%. At the time of writing, Bitcoin’s volatility still highly impacts COIN stock’s movements on NASDAQ. Luckily for investors, aside from COIN, there are other crypto-relevant stocks that are worth taking a look at and that can be used to diversify one’s financial portfolio. Let’s take a look at some other crypto stocks.
BTC / USDT vs COIN / USD
Other Crypto Stocks
COIN is not the only choice of investment for crypto enthusiasts to consider. In fact, there is a vast array of crypto stocks available globally. One type of crypto stock that has been on many investors’ radars consists of none other than mining stocks.
Mining stocks are financial assets that pertain to the mining of cryptocurrencies. One particularly popular crypto mining stock is the ‘Hut 8 Mining’.
Hut 8 Mining (HUT)
HUT made its stock market debut in 2018. It is launched by Hut 8 Mining Corporation, one of the largest cryptocurrency mining companies in the world specializing in the mining of Bitcoin (BTC) and Ethereum (ETH). Since 2020, the popularity of cryptocurrency mining has skyrocketed. This is due to the substantial price increase experienced by Bitcoin in this period of time.
BTC / USDT weekly chart - major price increase since the start of 2020
Since the beginning of 2020, HUT has performed exceptionally, with its stock rising by almost 1,000% in only 21 months. The majority of this positive price action occurred between December 2020 to March 2021, as shown below.
HUT / USD chart
AAX analyst Oliver Page is currently bullish on HUT. At the time of writing, the popular crypto mining stock is adopting a cup and handle formation. With the cryptocurrency market aiming for fresh all-time highs (ATHs) in Q4 2021, a positive breakout from this formation is expected.
The target price of HUT is set at US $23, should we see a positive breakout from the mining asset. This translates to an increase of 106% from the current price levels.
HUT / USD chart
Is HUT correlated with the cryptocurrency market?
Like the stock COIN, HUT’s movements are correlated with that of the cryptocurrency market. However, while COIN is closely correlated with BTC, HUT has shown a higher correlation with altcoins. For example, in the chart below, HUT shows a near-identical path to TRX, a popular altcoin.
TRX / USDT vs HUT / USD
Although MicroStrategy (MSTR) is not strictly a ‘crypto stock,’ it relates a lot to the industry. This is because the business intelligence firm is heavily invested in Bitcoin, thanks to the investment initiative of its founder. Michael J. Saylor, the founder of MicroStrategy, is a major advocate of cryptocurrencies, particularly Bitcoin. In 2020, MicroStrategy became the first publicly traded company to purchase Bitcoin as a way to diversify its treasury reserve. This move has paved the way for other institutional firms to enter the crypto space.
MicroStrategy Bitcoin Holdings
MicroStrategy currently holds 114,042 BTC. This translates to $5.1 billion USD in today’s Bitcoin value. In total, MicroStrategy has spent US $3.16 billion on Bitcoin. Currently, MicroStrategy’s BTC profits are at a healthy +42%. The success of MicroStrategy’s BTC investment has resulted in other institutional firms following suit and making a Bitcoin purchase of their own. Subsequently, with MicroStrategy's support of cryptocurrencies and with the institutional awareness it has managed to raise, the firm’s MSTR stock price has also benefited and skyrocketed in value.
MSTR / USD
BTC bringing the MSTR stock back to life
MicroStrategy’s Bitcoin investment has undoubtedly been one of the best decisions the business intelligence firm has made in its history. In late 1999, MSTR stock also experienced a price surge, as the tech stock increased in value thanks to the dotcom bubble. However, like all tech stocks during that period, the MSTR stock also plummeted in the following months. From January 2000 to July 2001, the stock price of MSTR crashed by 99.81%.
Since 2001, a handful of tech stocks such as Apple (APPL) and Microsoft Corporation (MSFT) have been able to recover from losses of approximately 75%, even recording new all-time highs. However, MicroStrategy’s MSTR did not manage to mirror their performances.
In November 2020, MSTR was still down -93% from its all-time high recorded in the year 2000. It was really BTC that came to the rescue of MSTR a few years later, as shown in the chart below.
MSTR / USD
Other notable crypto stocks:
- Payment solutions
- GPU / Chips
- Exchange / Markets
- CME group
How to invest in crypto stocks
All cryptocurrency stocks can be traded on the stock market. Most of these cryptocurrency stocks can be found on NASDAQ, as indicated above. However, it is possible to invest in cryptocurrency stocks directly from the cryptocurrency industry with cryptocurrencies and not fiat. How can this be achieved? Through the development of synthetic assets.
What are synthetic assets?
Synthetic assets are tokenized clones of traditional assets such as stocks. Synthetic assets often represent an exact replica of a traditional asset. Through synthetics, we can invest in traditional assets, directly from the cryptocurrency market! Stocks, precious metals, forex, and equities can now be traded on the cryptocurrency market thanks to synthetic assets.
Numerous traditional assets can be traded and farmed on Mirror Protocol
Does AAX offer synthetic assets?
Currently, AAX does not offer synthetic assets. However, AAX does offer Pax Gold (PAXG) and native tokens such as FTT and SNX, which belong to platforms that support synthetic assets.
Cryptocurrency investors can now diversify their portfolios with numerous crypto-related stocks. There is a wide range of stocks available for the average crypto enthusiast, from mining stocks to cryptocurrency exchange-based stocks. With so many cryptocurrency stocks available on the stock market, the cryptocurrency industry is drawing capital from traditional markets. Today, we can see increased interest from retail and institutional investors in the cryptocurrency market. This interest keeps growing as the cryptocurrency market continues to innovate, disrupt, and render current technologies and methodologies obsolete.
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