Home Business Opinion: You would have lost less by avoiding crypto stocks and just buying bitcoin

Opinion: You would have lost less by avoiding crypto stocks and just buying bitcoin

Opinion: You would have lost less by avoiding crypto stocks and just buying bitcoin

Bitcoin is decentralized enough to withstand single-factor impacts – there is no CEO of Bitcoin who can make right or wrong decisions that will affect the price, writes Ethan Lou.Charles Krupa/Associated Press

Consider the top 10 companies on the Toronto Stock Exchange or TSX Venture Exchange that deal in cryptocurrency or blockchain. In the last year, with the exception of two, none have done better than bitcoin.

From last year to now, bitcoin has fallen about 40%. But Mogo Inc., the worst performer among these large Canadian-listed companies, fell 80%.

Then there are those big crypto companies that would probably be in the TSX top 10 but have done so poorly that they’ve been taken out of it — like Voyager Digital Ltd., which has fallen 99% in the last year and filed for bankruptcy.

Bitcoin Miners Sell Holdings Amid Cold Crypto Winter

Why calling a fund for bitcoin, or any cryptocurrency, is so misleading

Such disastrous performance by these regulated and publicly traded companies is telling. This shows that, for investors looking to gain exposure to the sector, bitcoin itself has proven to be the most sensible choice. Most crypto stocks are simply not worth buying.

This goes against popular belief. Crypto stocks go up and down with bitcoin, like a gold miner and gold prices. But, unlike bitcoin, these stocks can be purchased with traditional investment platforms – tools that investors are familiar with. And they can be held in tax-advantaged accounts.

These stocks are also considered safer. A share in a business is equity and a stake in something tangible, as opposed to owning fictitious internet money. And it makes sense to buy a stake in the casino — an exchange like San Francisco’s Coinbase Global Inc., for example — rather than trying your luck at slots by buying crypto yourself.

But as we saw last week with the revelation that Coinbase was under investigation by the United States Securities and Exchange Commission, a company’s stock can be even more volatile than bitcoin – they may be affected by very specific factors that do not impact the market as a whole.

Coinbase, which is as big and stable as a company you can get in the crypto space, fell 7% on news of its SEC investigation. Meanwhile, bitcoin was down less than 1%, relatively flat on the day.

These firm-specific issues, of course, are also present in traditional commodity-based businesses. Suncor Energy Inc., for example, has seen a spate of worker deaths due to ongoing safety concerns, and analysts said this has caused its stock to rise half as much as some rivals during the recent oil boom. .

It’s just that crypto is a much younger, untested industry full of maverick-type players who, on their best days, are only half as cautious as Suncor’s management.

Consider the Vancouver-based company now known as Green Block Mining Corp., listed on the Canadian Securities Exchange. He had gotten into trouble last year with the Alberta Utilities Commission for mining bitcoin without telling anyone or getting the proper clearances.

A name change and a year later, Green Block still can’t wash the stain. Since peaking around $1.50 per share in February 2021, the stock has been steadily falling. It is now trading at 5 cents, with almost no correlation to bitcoin prices.

And crypto companies, while adopting the characteristics of commodity producers, also mimic the technology in that most companies – including all of the top 10 on the TSX – pay no dividends.

Crypto is also a whole other world, where traditional investment axioms will die. Bitcoin, for all its reputation for volatility compared to more traditional investments, is considered a boring bulwark in its own world.

Unlike a business or even other coins, bitcoin is decentralized enough to withstand the impacts of a single factor – there is no bitcoin CEO who can make right or wrong decisions that will affect the price. Bitcoin is almost a kind of index fund for the wider crypto world.

There is currently a downturn in nearly every industry, with a potential recession looming. Crypto-focused investors would have lost less money if they had ignored all the fancy new companies and just bought bitcoin.

If the prospect of managing the asset with absolutely irreversible transactions seems daunting, there are still exchange-traded funds, like the Purpose Bitcoin ETF from Purpose Investments. None of them are perfect, but these funds follow the price of bitcoin more closely, without the drama of a business. And investors can buy them on familiar platforms and in tax-advantaged accounts.

Finally, what are the two outliers not perform worse than bitcoin among the top 10 listed crypto-blockchain companies in Canada? Only one has done better, VitalHub Corp., which has fallen 14% over the past year. The other, Datametrex AI Ltd., fell about the same as Bitcoin’s 40%.

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