Cryptocurrencies and digital assets are now breaking through to the mainstream after nearly 12 years of steady adoption.
There are now more methods than ever before to wager on this business. On public stock markets, service providers, payment processors, and miners have all been listed. Meanwhile, regulators are still debating whether exchange-traded funds that follow specific digital assets should be allowed.
The entry barriers are swiftly disintegrating. Now is the time for investors to think about which instrument is the greatest fit for their portfolio.
Investing directly
These days, purchasing cryptocurrency via direct purchase is a simple process.
Mainstream payment companies including as PayPal and Square now have integrated services that allow its users to buy, hold, and sell cryptocurrencies. The investment platform Robinhood also supports trading in cryptocurrencies. To put it another way, you have the ability to directly own digital assets within these networks.
The primary benefit of direct investing is that full custody of the digital assets is granted to the investor, and there are no management fees incurred as a result. In light of this, you will need to exercise an increased level of vigilance if you decide to directly control and manage your digital assets.
Keeping your digital assets secure can be accomplished in a variety of methods, some of which include making an investment in a hardware wallet, cybersecurity tools, or a password manager.
Stocks in the cryptocurrency mining industry
In the past, institutional investors generally did not consider cryptocurrency mining companies to be investable. In general, the only way cryptocurrency miners could fund additional growth assets, such as purchasing additional hardware, was by selling the bitcoins they had previously mined. This was the only way miners could fund additional growth assets.
Miners of cryptocurrencies, on the other hand, have begun to acquire access to equity financing as a result of going public, which means that they are now able to hold a greater portion of their digital assets in reserve.
Marathon Digital Holdings is a good example of this (MARA). Recently, the company increased its reserves to a total of 8,027 BTC, which has a value of $244 million and represents around 24 percent of the company’s current market value. If the value of cryptocurrency continues to rise, Marathon and other miners could see a significant increase in their profits.
The ease with which crypto mining stocks can be bought and sold is one of the industry’s primary benefits. They are also eligible for ownership in retirement plans such as 401(k)s and Roth IRAs, among others. Leverage also helps these stocks to magnify the profits that may be made from their underlying cryptocurrency holdings.
The cryptocurrency mining sector is extremely competitive, which presents a challenge because margins may be subject to pressure in the future. This is the industry’s primary drawback.
Providers of cryptocurrency services
Digital assets could be represented by crypto-industry service providers. One of the best examples is Coinbase.
Cryptocurrency exchanges are a common starting point for newbie investors. Over 89 million people in 100 countries use the company to purchase, trade, store, and transfer bitcoins.. Crypto staking, payment cards, and institutional investment services are also available.
With service providers, you’re getting exposure to the entire industry. There are hundreds of crypto items on Coinbase that generate revenue for the company. As a result, these service providers are subject to increased competition, regulatory uncertainty, and the ongoing fear of cyberattacks. This is obviously a negative.
The ideal way to invest in cryptocurrencies relies on your long-term goals and willingness to take on some risk.