or about a decade, cryptocurrency has been a buzzword in the financial world. As one of the most volatile markets around today, the frenzy is fuelled by the promise of explosive returns, and often with little regard for the potential of dramatic losses too.
That’s not to mention the challenges that come with getting to understand the complex technology and multi-faceted measures necessary for the safe storage of cryptocurrency coins. Investors in cryptocurrencies need to overcome several considerable challenges.
The challenges of investing in cryptocurrency
Volatility
You can’t mention crypto without mentioning the extreme volatility of the market. For a cautious, more risk-averse investor, the potentially dramatic fluctuations in price in a short period of time can pose significant financial (and emotional) challenges.
Security
The decentralised nature of cryptocurrencies makes them an attractive target for hackers. Over the years, there have been a number of high-profile exchange hacks that have resulted in the loss of millions of dollars, and left investors wary of storing coins on digital platforms.
Regulation
The landscape for cryptocurrency regulation is still evolving and there’s no set global standard. Each country has their own rules and regulation isn’t universally adhered to or enforced. This can create uncertainty and substantially increase the risk for investors. (Especially if subject to a security breach or a bankrupt exchange!)
Complexity
Understanding the complex nature of cryptocurrencies, as well as the qualities of the different tokens, consensus mechanisms, and underlying blockchain technology requires a considerable time commitment to a steep learning curve that not every investor can (or is willing to) make.
So, what if we told you there was another way you could tap into the potential of the crypto revolution, without having to take ownership of crypto coins?
Well, there is. And it’s available through Nemo!
Investing in cryptocurrency companies with stocks
An alternative way to potentially benefit from the growth of the cryptocurrency sector is by investing in companies that operate within this space. Many companies, ranging from established tech giants to innovative startups, have entered the crypto arena, providing services such as blockchain development, cryptocurrency mining, and digital wallet solutions.
Investing in these companies via the stock market offers several advantages:
1. Security and regulation
Stock markets are well-regulated, providing a level of security not found in the crypto space. Companies listed on major stock exchanges, as well as brokers like Nemo, are subject to strict regulatory standards and compliance requirements, reducing the risk of fraud or malpractice. And, as you’re not taking ownership of cryptocurrency coins, you needn’t worry about the long list of measures needed to ensure safe custody.
2. Diversification of risk
By investing in cryptocurrency-related stocks, investors can diversify their portfolios without directly exposing themselves to the extreme volatility of individual cryptocurrencies. The success of these companies is often tied to the overall growth and adoption of blockchain technology rather than the unpredictable price movements of specific tokens.
3. Traditional metrics
Unlike cryptocurrencies that require an adapted, fresh approach to research, evaluating cryptocurrency-centric companies still relies on traditional metrics and familiar fundamental analysis. Information such as earnings reports and revenue growth, along with other accessible market and financial data, can be used to evaluate the performance of these companies, making it easier for investors to make informed decisions.
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Choosing the right stocks: A strategic approach
Before jumping into the stock market, it's essential to conduct thorough research and due diligence. Identify companies with a solid track record, a clear business strategy in the crypto space, and a commitment to regulatory compliance.
Consider factors such as market capitalisation, financial health, and potential profit, alongside the business’ vision, reputation, and roadmap to gauge the long-term viability of your investment.
Of course, here at Nemo, we like to make this as easy as possible for you. Which is why we have nemes. Nemes are handy collections of stocks based on a particular industry, theme, investing goal or similar.
And, naturally, we have a Crypto neme, featuring companies operating within the crypto sector. The collection includes businesses involved in cryptocurrency mining, popular crypto exchanges, and companies leveraging blockchain technology to deliver innovative business intelligence solutions and digital payments.
Check out the Crypto neme.
Update 23/10/2023: Crypto communities are getting hyped up about the probability of a Bitcoin Exchange-Traded Fund (ETF) being approved and coming to market by early 2024. An ETF, where a fund would own the bitcoin, would offer another way to invest in bitcoin, and potentially benefit from increases in value, without the administrative and security hassles of owning the coins yourself. Watch this space as we update on all things Bitcoin ETF.
Update 11/01/2024: Bitcoin ETFs have been APPROVED by the SEC. Find available Bitcoin ETFs you can invest in directly on Nemo now.
Browse Bitcoin ETF neme.
Confidently invest in crypto sector with Nemo
By carefully selecting stocks and staying informed about market trends, investors can enjoy the potential benefits of the cryptocurrency revolution without exposing themselves to the pitfalls of direct crypto investments.
Using Nemo, you can be sure you’ll never miss out on an investment opportunity in the crypto space again!
