Last Updated on December 2, 2023 by Prakash Kolli
While cryptocurrency prices have recently cooled, blockchain stocks remain hot. Bitcoin is hovering around $40,000, down 40% from its all-time high set in November 2021. However, Bitcoin’s underlying technology continues to make inroads, with disruptive fintech companies launching seemingly every day and even stodgy blue-chip companies like Walmart and General Motors taking an interest.
Many experts claim blockchain technology is the most significant innovation since the personal computer. But how can the average investor benefit? Here are 7 of the best blockchain stocks that will allow you to gain exposure to the coming reinvention of the business landscape.
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Before we jump into blockchain stocks, you should have a basic understanding of blockchain technology. While many people assume blockchain is synonymous with cryptocurrency, that is not necessarily the case. Cryptocurrencies use blockchain technology, but that is not their only use case.
A blockchain is a decentralized, distributed ledger that stores information across an extensive network. Cryptocurrencies store transaction information on a blockchain, allowing its movement to be traced across the network. This public ledger operates without a central authority, such as a bank, acting as a middleman. Blockchains can be used in almost any application. Transactional data can be recorded and stored on a public ledger to track ownership, such as houses, cars, patents, or intellectual property.
According to one study, the global market size of blockchain technology could reach over $1.4 trillion by 2030 at a growth rate of almost 86% per year. While there is some uncertainty about the ultimate value of blockchain-based products, there is clear vast untapped potential.
Today, investing in blockchain stocks could be compared to investing in internet stocks in the 1990s. While many early tech companies ultimately failed (think Netscape or AOL), the massive wave of innovation also produced big winners such as Google and Facebook. A decade from now, the companies that succeed in transforming businesses through blockchain technology will be household names. With so much projected growth, getting in on the ground floor of innovative companies in the space could lead to significant rewards in the future.
Here are seven companies that are investing in the future of blockchain technology. Like the savvy business owners who sold picks and shovels to gold diggers in the California Gold Rush in the mid-1800s, many of these companies invest in blockchain infrastructure and not cryptocurrency.
Whether Bitcoin reigns supreme or is cast aside for another yet-to-be-invented cryptocurrency, there will always be a need for transaction services, computing power, and secure blockchain platforms.
Coinbase (COIN) is one of the oldest and most prominent cryptocurrency exchanges, with almost $8 billion in revenue in 2021. The platform allows users to trade over 100 different digital assets, and the list is constantly growing.
Coinbase offers many different products for both retail and institutional investors, such as:
- Coinbase app where customers can trade many other cryptocurrencies
- Coinbase Prime, a professional trading platform for institutional investors
- USD Coin is an innovative stablecoin that allows customers to exchange dollars for a cryptocurrency pegged to the dollar
- Coinbase Card, a debit card that enables customers to spend cryptocurrency and earn cashback rewards
From an investor’s perspective, Coinbase shines regardless of the dominant cryptocurrency a decade from now. Coinbase has a large user base on its exchange and should benefit as the crypto and blockchain economy grows.
Block (SQ), the financial technology company formerly known as Square, has big plans for the future of blockchain. Jack Dorsey initially co-founded Square as a side job to his more famous company, Twitter, providing an innovative payment-processing platform for small businesses.
In late 2021 the company announced a name change to Block to acknowledge its pursuit of other projects and products such as Cash App, TIDAL, and TBD54566975 that focus on crypto and blockchain technology.
With Cash App, users can buy and sell cryptocurrency within the app. Block also has a team of developers that builds open-source Bitcoin projects and is heavily invested in building a blockchain developer platform to improve access and integration to blockchain products.
Another financial technology company that has set its sights on growth in the age of cryptocurrencies is Paypal (PYPL). With both its Paypal and Venmo services, the company is a significant contender in digital payments.
The platform was an early adopter of Bitcoin and started accepting payments via the cryptocurrency in 2014. Now users can buy and sell crypto from their Paypal accounts, and the company is reportedly exploring the launch of their own stablecoin.
Nvidia (NVDA) is the undisputed leader in high-end graphics processing units (GPUs), gaining its initial foothold in the video game world with its GeForce line of graphics cards. Its GPUs are highly sought after for cryptocurrency mining, as more and more computing power is required to unlock additional coins.
Nvidia even has a dedicated GPU product aimed at professional miners. As the adoption of cryptocurrencies continues to grow, Nvidia is at the forefront of providing the hardware necessary to support its growing infrastructure.
Mastercard (MA) is one of the leading payment-processing giants that has benefited from the trend toward a cashless society. The company makes a lot of its money by charging a small fee to retailers for each debit and credit card transaction.
It has publicly embraced cryptocurrencies and blockchain technology. Mastercard plans to support some cryptocurrencies directly on its network and has unveiled several partnerships with other crypto companies. Mastercard recently released a crypto rewards credit card developed with Gemini and a crypto-backed credit payment method through Nexo.
While, in theory, cryptocurrencies pose a threat to traditional payment processors such as Mastercard and Visa due to their decentralized nature, Mastercard is investing heavily in blockchain and aims to become a significant player in the space.
Additionally, Mastercard is a Dividend Contender.
When you think of IBM (IBM), you may think of a technology has-been, but they are still a significant player, especially in consulting and enterprise-level services.
IBM focuses on developing blockchain solutions across multiple industries such as healthcare, telecommunications, insurance, manufacturing, and supply chain. Because of blockchain’s decentralized, transparent, and secure nature, the company is poised to grow as more and more businesses adopt the technology. IBM aims to capitalize on this growth through consulting services and unique blockchain products.
One example of IBM’s entrance into the market is creating a transparent supply chain ledger on a blockchain to ensure the reliable and safe delivery of COVID-19 vaccines during the pandemic.
Perhaps the best way to invest in blockchain stocks is not through individual companies but in a fund such as the GlobalX Blockchain ETF (BKCH). Instead of finding the next Amazon or Tesla, investing in a basket of stocks focusing on blockchain technology could help you benefit from the general trend of blockchain adoption.
The GlobalX Blockchain ETF invests in 25 different companies as of this writing, some of which were discussed above. According to its prospectus, the ETF focuses on companies in blockchain and digital asset mining, transactions, applications, hardware, and integration. With a fairly reasonable 0.50% expense ratio, this blockchain ETF provides exposure to various industries and strategies that could benefit from blockchain adoption and innovation.
It can sometimes be difficult to invest and diversify your portfolio if you don’t have much money to start. For example, buying one share of each stock above would cost over $1,000. However, you don’t need to have an extra $1,000 a month to invest before starting. By investing through a platform like M1 Finance, you can buy fractional shares of stock. Buying fractional shares is a great way to purchase stock in a company with a high share price or split up a small investment among multiple stocks.
Investing in a Blockchain ETF is another way to gain a diverse portfolio with a relatively small amount of money since each share you buy is invested across dozens of companies.
Despite the misgivings of many crypto nay-sayers, blockchain is here to stay. With the incredible gains in Bitcoin, Ethereum, and other cryptocurrencies over the last few years, “blockchain” has become a buzzword on Wall Street. However, what that technology will look like in the future is anyone’s guess. Adding blockchain stocks to your portfolio can be an excellent way to diversify for the future, but there are always risks with any unproven technology. It is always prudent to evaluate your risk tolerance and invest wisely as an individual investor.
This article by Andrew Herrig of Wealthy Nickel originally appeared on Wealth of Geeks and, was republished with permission.
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
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