What Are the Best Stocks to Gain Crypto Exposure?

Crypto Exchange Stocks

A major milestone for the crypto industry took place in 2021 when Coinbase’s long-anticipated initial public offering (IPO) took place. Coinbase (COIN) is perhaps the most well-respected and well-known name in the entire crypto industry, and the platform has been a massive onramp for those who wish to get involved in bitcoin or another crypto asset for the first time. Through the combination of a user-friendly brokerage platform and a more advanced exchange for pro traders, Coinbase has become a major hub of crypto trading activity. The company is currently looking for new ways to generate revenue besides simply charging fees on crypto trades, but the close correlation with trading volume and the general growth of the industry makes Coinbase one of the best ways to invest in crypto via the stock market.

Another exchange that has become a key competitor to Coinbase over the past few years is Robinhood (HOOD). Notably, the crypto section of the Robinhood trading app is a new addition to the platform. Originally, Robinhood was launched as a way for low-value investors to get involved in the traditional stock market with extremely low fees. Many pundits have pointed out how Robinhood has drastically changed how the markets work due to the introduction of a completely new class of investors, with the most notable example of this phenomenon being the wild fluctuations in meme stocks such as Gamestop. The crypto side of Robinhood’s business has seen massive growth over the past few years, and the company is expanding further into this market with the upcoming launch of non-custodial crypto wallets for their users. While the play here is not entirely on the crypto market, Robinhood still has plenty of exposure to this growing industry.

Fintech Stocks with Crypto Exposure

On top of the advanced exchanges that allow users to trade crypto, a number of more traditional fintech and banking companies that have integrated some aspects of blockchain technology are also traded on the public markets. Block (SQ), formerly known as Square, is perhaps the most Bitcoin-focused fintech company in the entire world. Founded by Jack Dorsey, who also created Twitter, Block has been working heavily to promote bitcoin as the currency of the internet and help the overall ecosystem around the peer-to-peer digital cash system continue to flourish.

Block has two subsidiaries, TBD and Spiral, which are completely focused on Bitcoin. TBD is intended to build out more aspects of decentralized finance for Bitcoin, while Spiral is basically a development hub for the Bitcoin protocol and other networks built on top of the base Bitcoin blockchain. Additionally, Block holds bitcoin on its balance sheet, and the cryptocurrency is also heavily integrated into Cash App. More recently, Block has become involved in development hardware wallets and open mining hardware. It should be noted that Block’s products and services are entirely focused on bitcoin, so there is unlikely to be much exposure to altcoins available through this stock.

Of course, the most well-known name in the business when it comes to online payments is PayPal. This fintech giant recently added the ability for users on both PayPal and Venmo to buy and sell bitcoin and a few other cryptocurrencies. On top of that, PayPal users are also able to use their crypto balances to make purchases online wherever PayPal is accepted. Notably, PayPal has been dabbling with bitcoin for quite some time, as its subsidiary Braintree enabled bitcoin micropayments on its platform all the way back in 2014. Additionally, PayPal has been integrated into Coinbase as an option for U.S. dollar withdrawals. For now, it is clear that PayPal is still figuring out what it’s going to do with crypto, but it’s also clear they’ve started to take more serious strides over the past year or two.

Bitcoin Mining Stocks

Bitcoin mining stocks are another way to gain exposure to bitcoin through the stock market in a rather direct manner. The number of bitcoin mining companies traded on the stock market has exploded over the past few years, so there is no dearth of options to choose from here.

Bitfarms (BITF) is a bitcoin mining company operating in North America whose operations run entirely on hydroelectric power. At the time of this writing, the company reported that the average cost for them to mine a single bitcoin is $6,900, which leads plenty of room for profit at a current price of more than $40,000. It should also be noted that the company purchased 1,000 bitcoin separately from the bitcoin they had already mined in January 2022.

Marathon Digital Holdings (MARA) is another bitcoin mining company operating in North America that is similar to Bitfarms. Marathon aims to become the largest bitcoin miner in all of North America with 13.3 Exahash of mining power deployed by the middle of 2022. Perhaps the most newsworthy event to happen with Marathon was when the company claimed they were going to ignore certain types of Bitcoin transactions and not include them in the blocks that they mine. The company later backtracked on this idea after they came to better understand the value of Bitcoin as an open, permissionless network.

Two other publicly-traded companies that are mining bitcoin on behalf of their investors are Riot Blockchain (RIOT) and Hut 8 (HUT). If you’d like to get involved with a stock that is actually building the hardware that is used in the bitcoin mining process, then you may want to take a look at Canaan (CAN). Of course, if you’re interested in gaining exposure to altcoins where GPU-based minig is still relevant, then you could always take a look at Nvidia (NVDA) and Advanced Micro Devices (AMD), which have traditionally more related to the gaming industry.

Bitcoin ETFs and Other Similar Products

Of course, the most direct way to gain exposure to bitcoin, albeit not yet other crypto assets, is via some sort of investment vehicle that simply holds bitcoin on behalf of its stock holders. In late 2021, the first true bitcoin exchange traded fund (ETF) in the United States was launched in the form of ProShares Bitcoin Strategy (BITO). This ETF uses the bitcoin futures market to provide investors with exposure to the bitcoin price via the traditional stock market.

While a spot price-based ETF is still not available in the U.S., there is a publicly-traded company that is effectively taking on this role for investors. MicroStrategy (MSTR) pivoted to a bitcoin-focused strategy in 2020 after CEO Michael Saylor became convinced of the digital asset’s future price appreciation. Saylor has since become one of the most prominent evangelists for the cryptocurrency, and MicroStrategy currently holds 124,391 bitcoin. At current prices, MicroStrategy’s bitcoin holdings are worth more than $5 billion, and the company purchased their holdings over time for more than $1 billion less than that. There are a number of other publicly-traded companies that hold bitcoin on their balance sheets, but nobody else comes close to MicroStrategy.

Of course, the Grayscale Bitcoin Trust (GBTC) is also still available, but it should be noted that this is technically not an ETF and comes with some limitations. That said, Grayscale has been pursuing the ability to relaunch their fund as a true ETF in the near future.

As of today, the vast majority of crypto price exposure that is available via traditional stocks is solely focused on bitcoin. While things could change in the future, this is something to keep in mind when you’re looking to get crypto exposure via the stock market. For now, those interested in alternative crypto assets may be better off sticking with direct exposure to their preferred assets.