Are Bitcoin and crypto stocks different pieces of the same puzzle

Are Bitcoin and crypto stocks different pieces of the same puzzle

The financial landscape drastically evolved over the past decade. In effect, a host of different investment vehicles have made their presence felt in the space. Despite the progress made, the ulterior motive of any investor is to earn higher returns. Simply put, they work for money and expect money to work for them in return.

Weighing the options

Right from real-estate and stocks, to cryptocurrencies and other funds, investors already have a plethora of options to choose from. However, with the recent approval of the Volt Equity’s ETF, investors now face a novel dilemma of whether or not to consider this typically hybrid option.

Simply put, an ETF is a type of investment fund that’s usually traded on stock exchanges. These funds are quite similar to mutual funds and have gained popularity over time.

As highlighted in an earlier article, the Volt ETF would not be directly investing in Bitcoin. Instead, it intends to put about 80% of its net assets into “Bitcoin revolution companies,” options and ETFs with exposure to those companies. The remaining 20% would be diverted towards more traditional stocks.

Revolution vs Non-Revolution

A host of companies, irrespective of the kind of service they provide, hold Bitcoin on their Balance Sheet. By possessing over 114,042 BTC, MicroStrategy currently leads the pack, while others like Tesla and Galaxy Digital follow closely behind.

Well, at the time of writing, an interesting trend was noted. By and large, crypto related stocks have outperformed the broader S&P index over the past month. The stock prices of MicroStrategy, Silvergate and Coinbase, for starters, have risen by 10%, 48.98% and 2% in the past 30 days.

The aforementioned numbers underline the fact that ‘revolution’ companies have been performing better than the broader market. In fact, as far as the long-term performance is also concerned, these companies have been faring exceptionally well.

Affected by other macro-economic factors, the S&P 500 index, as a whole, has shrunk by nearly 2% in the same one-month window. The broader index dip clearly suggests that other go-to, top stocks haven’t been able to deliver as well as crypto-centric stocks in the short-run. Thus, 1/5th of the fund that’s set to be allocated towards ‘traditional’ or non-revolution stocks would only offset the risk.

The better pick

Leaving aside stocks, Bitcoin has been able to generate HODLers around 25% returns over the past one month, which is pretty much in tandem with what crypto related stocks have fetched.

Thus, market participants with less-risk appetite who would want to invest fetch fancy returns in the short term can consider the ETF option. While others who do not mind the volatile nature of the crypto market and are willing to bear additional risk can opt to directly invest in Bitcoin for the long run.

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