Investing in Bitcoin with CFDs is no different from investing in stocks, commodities or indices. However, it is important to keep in mind the specifics of the cryptocurrency market. Bitcoin, Ethereum or other cryptocurrencies are characterized by high volatility. When using contracts for difference, it is important to keep this in mind, because the high volatility and leverage present in the case of CFDs can lead to both spectacular profits and deep losses on the account.
Investing in Bitcoin Implicitly
Investing in Bitcoin using CFDs or through a specialized cryptocurrency exchange is certainly enough to gain exposure to the cryptocurrency market. However, the same effect can be achieved indirectly – by investing in companies that are strongly linked to digital currencies.
An investment in the shares of a cryptocurrency exchange or a company responsible for creating an application where it is possible to store Bitcoin safely? This is possible thanks to XTB’s wide offer – among the thousands of available companies, you can find those that are more or less correlated with the cryptocurrency market. Which companies are worth checking if we want to gain indirect exposure to Bitcoin?
Coinbase – is one of the most recognizable cryptocurrency exchanges in the world. The giant’s shares went to public trading on the Nasdaq floor in April 2021. At the beginning of August, the company reported revenues of $2.03 billion. Coinbase’s net profits exceeded $1.6 billion during the same period. These results may be astounding and are another confirmation of changing trends. Coinbase shares can be found on the xStation 5 platform under the ticker COIN. US.
Square – is the company responsible for creating Cash App – an application that allows you to buy, sell, transfer and securely store cryptocurrencies. In its report for the second quarter of 2021, Square reported tripling its revenue to $2.72 billion. The company’s net profit increased to $55 million at the time from just $17 million reported a year ago. The company not only benefited from the significant increase in Bitcoin’s valuation in 2021, but also thanks to the progressive increase in the number of active users. Coinbase shares can be found on the xStation 5 platform under the ticker SQ. US.
Marathon Digital Holdings – is a company involved in the process of mining (“mining”) new Bitcoins. In August 2021, Marathon announced the purchase of 30,000 new, specialized cryptocurrency miners for almost $121 million. This purchase will certainly translate into a noticeable increase in the total computing power of the company, which makes Marathon Digital Holdings have a chance to become one of the largest Bitcoin mines in the world. As recently as mid-2021, the company was mining an average of 654 BTC per quarter. Marathon Digital Holdings shares can be found on the xStation 5 platform under the ticker MARA. US.
Riot Blockchain – Like Marathon Digital Holdings, Riot Blockchain is dedicated to mining new Bitcoins. The company’s goal is to become the largest BTC mining pool in North America. In July 2021 alone, Riot mined 444 BTC, which is 771% higher than the value reported a year ago. Like Marathon Digital Holdings, Riot Blockchain is also reinvesting free cash flows in new cryptocurrency miners. Riot Blockchain shares can be found on the xStation 5 platform under the ticker RIOT. US.
Bitcoin price cycle
When investing in Bitcoin, it is not uncommon to come across opinions that the oldest of the cryptocurrencies is susceptible to maintaining a certain cycle. Indeed, at the very heart of Bitcoin, this cycle occurs – we mean halving.
Bitcoin’s volatility cycle often resembles a strong recovery followed by an economic recession. The price rises very strongly and practically continuously until negative information appears or there are no more buyers. Then, holders of Bitcoin or other cryptocurrencies decide to exit the market and, due to its limited liquidity, have to lower their selling prices more and more, which often leads to several or even several dozen percent declines. After the wave of sell-offs comes a wave of stagnation, which in the case of the cryptocurrency market can last from several to even several dozen months.
Above, we see Bitcoin’s weekly chart with vertical lines superimposed on it, marking the last two BTC halvings. If the key rule of technical analysis that is “history likes to repeat itself” is true, then it can be assumed that the peak on the Bitcoin chart in the current cycle has already been formed.
In the previous cycle, started back in 2016, the peak was formed 17 months after the halving. In the current cycle, the peak in the $64k region was formed just 11 months after the last halving, and the seventeenth month of the cycle falls in early October 2021. The fact that Bitcoin has not been able to form a new high could indicate the possibility of a bear market or at least a broader consolidation.
Considering how dynamically Bitcoin’s valuation has increased since the last halving – it is difficult to pass by this market indifferently. More and more people are trying to find an answer to the question of how to invest in Bitcoin, and we hope this article has answered that question. However, in order to summarize the issue of investing in Bitcoin, we have prepared a few arguments that can be considered as advantages and disadvantages of the cryptocurrency market.