Bitcoin is so volatile that if you wanted to “buy the dip,” it would likely be there.
Trading at $51,444 as of this writing, Bitcoin (BTC) has fallen 18.7% in the last month. Can this be an opportunity for traders who were previously standing by on the sidelines?
It all depends on how high you think Bitcoin can go. Cathie Wood, for instance, told Barron’s this past month that if “institutional investors were to move into BTC and allocate 5% of their portfolios,” the value of the cryptocurrency would skyrocket to $560,000 by 2026.
Based on where Bitcoin is at today, her most recent projection implies an upside of 988%. That may seem far-fetched but remember Cathie Wood was right on the money when she last predicted a 1,200% upside in Tesla.
So here is a couple of ways to play the cryptocurrency boom.
Wood herself is offering a new method to invest in cryptocurrency. In Sept., Ark Next Generation Internet ETF changed its prospectus to include exposure to BTC via Canadian ETFs.
The first BTC ETF on the NY Stock Exchange began trading in Oct., but Canada has been ahead of the United States for a while. Several Bitcoin ETFs were launched in Canada in 2021, including Purpose Bitcoin ETF, CI Galaxy Bitcoin ETF, Evolve Bitcoin ETF and 3iQ CoinShares Bitcoin ETF.
In the U.S., the launch of the ProShare BTC Strategy ETF was arguably a big catalyst behind BTC’s rally in Oct. The fund holds BTC futures contracts that are trading on the Chicago Mercantile Exchange.
Investors who want exposure to the cryptocurrency market can invest in these ETFs, but you could also buy BTC directly. Some trading apps let you buy both crypto and ETFs commission-free.
Companies that have tied themselves to the cryptocurrency market provide another method for traders to benefit from a cryptocurrency rally.
For instance, enterprise software firm MicroStrategy bought 7,002 bitcoins between October 1 and November 29. That brings its total owned bitcoin count to 121,044, a stockpile valued at nearly $6.2 billion.
Because of MicroStrategy’s giant Bitcoin stake, some traders have used it as a proxy for investing in the crypto. In the past, rallies in BTC usually led to similar moves in MicroStrategy’s stock price.
Then there is Riot Blockchain, which mines BTC and hosts BTC mining equipment for institutional clients. Thanks to the growth of the cryptocurrency, Riot stocks have returned a stunning 182% over the past year.
Author: Blake Ambrose