By Shane Neagle
Despite Bitcoin’s appeal, several large investment firms are skeptical about investing in digital assets. However, more innovative means are now used to offer indirect exposure to the dominant cryptocurrency.
Bitcoin has come a long way from just being a peer-to-peer electronic cash system put forward by its pseudonymous founder Satoshi Nakamoto. Recent evidence suggests a growing interest and desire among everyday individuals to invest in cryptocurrency. This interest stems from the prospects of enormous returns that the sector creates compared to investing in stocks which was the norm before digital assets.
Recent data from Grayscale Investment suggests that more Americans are warming up to investing in Bitcoin. Roughly 13% of the American populace own BTC, with 55% of them investing in 2021. Furthermore, according to reports, Americans have become increasingly interested in having Bitcoin in their life insurance.
Interestingly, the clamor for Bitcoin exposure has reached large corporations. Several renowned companies have accepted the growing importance of BTC and have made moves to invest in it. However, there is an inherent hesitance in their efforts due to several issues.
Various Constraints Leave Corporations Skeptical About Bitcoin Exposure
Despite their growing desire to invest directly in Bitcoin, large corporations are reluctant to do so due to existing issues in the space. The first and most challenging is the issue of government regulation. Recently, SEC Chair Gary Gensler, called the crypto market the wild, wild west due to its volatility.
Further, the volatility of price swings poses an unusual challenge to large firms. Just as they can make astronomical gains on investments, they can face significant losses in a moment’s notice. This makes a Bitcoin investment risky, hence the cold feet.
Alongside the SEC’s effort to regulate the industry, several politicians, including the congressional Blockchain caucus, have urged Congress to create a regulatory framework for the space. The US Congress, on its part, has taken steps with several hearings taking place, but is yet to create laws that fully govern the industry.
Secondly, there is the issue of hacks, theft, and exploitation among the crypto space. According to a Chainalysis report, the amount of funds stolen from DeFi platforms increased by 1,330% in 2021 when compared to that of 2020.
Thirdly, the procedures involved in investing in Bitcoin are usually not as straightforward as traditional investments in stocks. The aforementioned risks associated with Bitcoin investing result in stringent due diligence processes which can hinder active investments in BTC on behalf of corporations.
Despite these issues, several large firms have developed innovative ways to gain exposure to BTC indirectly. Some have taken the more direct approach of buying and holding it on their balance sheet. Others have opted for more traditional blanket investment vehicles. Separately, some public companies have a stock which displays price action very similar to that of Bitcoin, due to the nature of their industry.
In subsequent sections, we will look at the likes of Microstrategy, Coinbase, Grayscale Investments and Canaan. Inc.—four public companies which feature some indirect exposure to Bitcoin to a certain degree, regardless of the existing challenges involved.
MicroStrategy Leads The Pack
MicroStrategy is a data analytics platform that provides companies of all sizes with actionable intelligence. It allows users to create bespoke real-time dashboards by customizing data representations. It also takes advantage of data connectivity, machine intelligence, and mobile accessibility to provide individuals with complete control over their findings.
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