crypto The market has hit multi-month lows, with top digital assets like Bitcoin and Ethereum falling from their all-time highs. Under such circumstances, can investing in blockchain stocks protect investors from the volatility seen in trading digital assets?
blockchain stock Look at companies that derive their various businesses from the crypto ecosystem such as crypto trading, cryptocurrency mining, and crypto technology development.
Nvidia, Coinbase, Block and AMD were among the top 25 stocks in terms of trading volume in May, according to Vested Finance, a global investment platform.
Other major crypto stocks include Robinhood and Microstrategy, the largest corporate holder of bitcoin in the world.
Stocks of companies that enable crypto trading, such as Coinbase and Robinhood, have outperformed crypto assets, while companies such as Nvidia and AMD that are involved in designing chips and technologies used for crypto mining have outperformed. has performed.
“This would be because these latter companies have other sources of revenue besides crypto. When it comes to crypto exchanges, missed revenue estimates and poor earnings forecasts have also affected their share price,” Veeram Shah, Co-Founder and CEO, Vested Finance said.
On a one-year basis, Bitcoin is down 42%, Ethereum 48%, Microstrategy 74%, and Coinbase 78%.
According to experts, investing in crypto assets or stocks is risky due to volatility.
“However, investing in stocks of companies that have crypto exposure, but whose income does not depend on earnings from crypto, may be safer. Plus, it is also an option for investors looking to buy and store crypto assets. Not wanting to. The price of the crypto asset has dropped significantly from its highs, some investors may choose to buy with the downside,” Shah said.
Some experts suggest that both crypto or blockchain stocks have their relative merits and demerits.
“Investing in crypto is a direct bet on one or several currencies and tokens, with the expectation that some of them could become potential replacements for traditional assets, including currency and gold. On the other hand, investing in blockchain companies is based on this expectation. That the technology itself is growing in importance and becoming prevalent,” said Ramkumar Venkataramani, Head, Investment Advisory, Crystal.AI.
For investors, risk appetite and long-term asset allocation are equally important. Note that crypto investments in India attract a 30% tax on capital gains from digital assets with effect from April 1. 1% TDS will also be levied on every crypto transaction from July 1.
Investments in foreign stocks are subject to capital gains tax, regardless of whether the company is part of the crypto ecosystem or not.