Seems obvious, right? Well, there’s a common misconception among new crypto market participants that bitcoin is a company stock. While its price activity can correlate with traditional markets on occasion, it is, in fact, an entirely separate asset class.
Bitcoin is a cryptocurrency – a type of digital asset secured by cryptography that can be used to make electronic payments over the internet or act as a store of value like gold or silver.
Think of cryptocurrencies as the emails of the currency world. They do not exist in physical form, they can be sent in minutes and they do not require multiple intermediaries to handle the payment.
Unlike fiat currencies like the U.S dollar or euro that store all card and wire transactions on a central ledger maintained by a single authority, bitcoin and other cryptocurrencies use a technology called “blockchain.” This is a globally distributed ledger that can be maintained and copied by anyone on the planet and ensures total immutability and transparency.
Key differences between bitcoin and stocks
- Traded on traditional stock exchanges such as Nasdaq, London Stock Exchange, Deutsche Börse, etc.
- Can only be traded Monday to Friday. Market opening and closing times vary between stock exchanges
- Regulated financial products
- Purchasers receive share certificates to show legal proof of ownership
- Companies can produce new shares after publicly launching, though there is a finite limit
- Brokerages maintain their own record of stock trades that they execute on behalf of clients. In the United States, this information is not publicly available unless an investor purchases over 5% of a listed company
- Traded on centralized and decentralized crypto exchanges
- Crypto markets do not close so bitcoin can be traded at any time on any day
- Bitcoin is not a regulated investment vehicle; however, most international jurisdictions recognize it as property
- Purchasers can hold their own bitcoin or delegate safe storage to third-party custodians
- There will only ever be 21 million bitcoins. No new coins can be created
- The Bitcoin blockchain publicly records all transactions and can be viewed or downloaded by anyone at any time
Company stocks that are tied to bitcoin
Despite the differences between these two investment options, there are a number of publicly traded companies whose stocks are tied to the performance of bitcoin. This is because the companies are either directly engaged in bitcoin-related activities such as mining, hold a substantial amount of bitcoin in reserves or their target market is crypto users.
- Silvergate Capital
- Riot Blockchain
- Argo Blockchain
- MGT Capital Investments
- Hut 8 Mining
- Voyager Digital
- Canaan Creative
This generally means that when bitcoin’s price is performing well these stocks also tend to perform well, and vice versa.
Recently, JPMorgan launched a new financial product called the “Cryptocurrency Exposure Basket” – a debt instrument linked to leading…
Read more:Bitcoin Is Not a Stock – CoinDesk