Introduction to Cryptocurrencies

Today, I want to delve into the world of cryptocurrencies. Young investors have grown up with these digital assets and have been active in this exciting market for years. The older generation of investors often hesitated, either due to a lack of knowledge or apprehension. By now, everyone is familiar with Bitcoin, Ethereum and Ripple, and possibly Binance, Solana or Dogecoin.

Indirect Ways to Invest in Cryptocurrencies

In this blog, I won’t focus specifically on the cryptocurrencies themselves or crypto-ETFs. Instead, I want to explore indirect ways to engage with the crypto world. This could be through companies involved in crypto mining or firms that hold significant amounts of Bitcoin as a reserve asset, such as MicroStrategy, which has an incredible position of over 200,000 BTC.

Analyzing the Evolution of Bitcoin and Related Stocks

Naturally, all these companies benefit when cryptocurrencies rise. Therefore, we’ll examine the evolution of the archetypal cryptocurrency, Bitcoin.

Image: 5-Year Bitcoin Chart with Equilibrium Line and Key Pivots

Over the long term, we’ll draw an equilibrium line and highlight some key pivot points. Equilibirum means a state of balance between opposing forces or actions. In the investment world, it means the interaction between the bulls and the bears.

Image: 1-Year Bitcoin Chart with Key Pivots and Outbreak Points

In the short term, you see, on-a-smaller-degree, pivots around $44,000, $51,000, and $60,000. Since June, the trend has been downward. A descending trend line and the upper pivot form a cluster around 60,000. Important enough to follow up. Breaking through and staying above 60,000 is the key.

Comparing Bitcoin and MicroStrategy

You can see a layer of 3 red and 2 green zones over the BTC price chart. The same layer is placed over MicroStrategy.

You note that the evolution of BTC and MSTR are nicely parallel, making MSTR a viable alternative for indirect investment.

MicroStrategy is part of the S&P500.
The company provides business intelligence (BI), mobile software and cloud-based services.

• In August 2020, MicroStrategy invested $250 million in bitcoin as a treasury reserve asset.
• On June 20, 2024, MicroStrategy announced that, during the period between April 27, 2024 and June 19, 2024, MicroStrategy acquired approximately 11,931 bitcoins at an average price of approximately $65,883 per bitcoin.
  As of June 20, 2024, MicroStrategy, together with its subsidiaries, held an aggregate of approximately 226,331 bitcoins. (average purchase price of approximately $36,798 per bitcoin)

Crypto Mining

For those seeking even higher leverage, crypto miners offer interesting opportunities.

Image: YTD Bitcoin Chart vs. 3 Months Performance of Crypto Miners

In the following study, you’ll see the evolution of BTC year-to-date on the left and a selection of miners over the past three months on the right. Notably, since June, BTC has been falling while some miners have been rising. Remarkable!

The top four performers are:

CORZ: Core Scientific Inc
IREN: Iris Energy Ltd
WULF: TeraWulf Inc
HUT: Hut 8 Corporation

Active investors should definitely follow the top-performing stocks in this sector.

Conclusion

Indirect investment in cryptocurrencies can provide a balanced approach to entering the crypto market without direct exposure to the volatile nature of individual cryptocurrencies. By investing in companies like MicroStrategy or crypto miners, you can potentially benefit from the overall growth and trends within the cryptocurrency space.