Bitcoin and crypto stocks: how to invest in them

How can I invest in crypto?

There are two main ways to invest or trade bitcoin and cryptocurrencies:

• Directly on a crypto exchange, or using a crypto wallet
• Via shares listed and traded on either UK, US or other international stock exchange

Even though the UK financial authorities’ advice is to only invest in crypto if you are prepared to lose all your money, many still do.

According to the most recent Financial Conduct Authority (FCA) survey, 12% of UK adults have invested in crypto, which is roughly seven million people. The FCA’s researchers found that 93% of adults had heard of crypto.

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Presumably contrary to its actual aims, the FCA’s ban on retail investors buying exchange- traded funds (ETFs) that hold bitcoin, means that the UK is potentially a riskier jurisdiction for crypto because some will be pushed on to crypto exchanges where there are no regulatory protections.

However, as we shall see, there are still plenty of ways for the retail investor to gain regulated exposure to crypto.

If you do decide to take the plunge, please first read our article which examines the risks of investing in bitcoin and crypto stocks.

• Bitcoin, cryptocurrencies and blockchain – how it all works
• Bitcoin and crypto stocks: examining the risk

Cryptocurrency stocks

There is a growing number of publicly listed companies that hold bitcoin and other cryptocurrencies on their balance sheet or in treasury. The best known of the crypto acquirers is MicroStrategy, and it has spawned some imitators. These types of companies are not confined to the US markets.

MicroStrategy

(name changed to Strategy but often referred to by its old name)

Strategy Class A (NASDAQ:MSTR) provides leveraged exposure to bitcoin. As of 4 February 2025, it owned 471,107 bitcoin. It announced at the end of October last year that it planned to raise $42 billion over three years in a mixture of debt and equity to buy bitcoin.

Since it started buying and holding bitcoin in August 2020, the stock has been trading at a premium to the value of the bitcoin it holds (its net asset value (NAV) excluding the dwindling significance of its software business). The premium to NAV on 14 February 2025 was 1.894x (against diluted shares, it is 2.124x).

It suggests that investors are willing to pay a premium for the convenience that the regulated entity provides over the custody and security issues involved in holding bitcoin directly.

However, there are other risks associated with MicroStrategy’s business model. Importantly, it is leveraged, which means should the value of its bitcoin fall and not recover over a significant period of time, it might run into difficulty with its convertible bonds.

The value of the bonds which it uses to fund the purchase of bitcoin would fall along with the stock price, so there would be a weakening incentive to convert the bonds into equity. The price at which the bonds convert is set at a premium to the existing share price, but if the share price falls, the premium narrows.

Nevertheless, the bondholder would still get the coupon attached to the bond upon maturity, at the expense of the shareholders, but that assumes that the company is not forced to default on its debt.

It is a similar story for the preferred stock the company sells as part of its fundraising efforts, should the price of the common stock fall in response to a steep sustained decline in the bitcoin price. If the price of bitcoin falls, it will hit the price of the common stock and the incentive to convert will dissipate. Additionally, in the event of bankruptcy proceedings, preferred stock is junior to corporate debt.

Still, for now, MicroStrategy has hit the sweet spot – the more money it is able to raise to buy more bitcoin, the more its buying activity supports the bitcoin price. This supports the share price of MicroStrategy, making it easier for the company to raise more debt to buy more bitcoin.

There’s one other looming risk to consider: tax. A change to accounting rules – the change that allowed Tesla Inc (NASDAQ:TSLA) to mark-to-market the value of its bitcoin holdings in its Q4 2024 results (using the current market value of its assets) – allows the US Inland Revenue Service (IRS) to tax the paper gains. The IRS has provided exemptions for companies sitting on unrealised gains, so they don't have to pay the 15% tax, but no such exemptions under the Inflation Reduction Act of 2022 have been made for crypto assets. MicroStrategy could be sitting on a tax bill of circa $20 billion.

How long CEO Michael Saylor (pictured below) can keep the MicroStrategy gravy train on the tracks is anybody’s guess, but no one can doubt that it has been delivering for shareholders, especially since the beginning of 2024. In the 12 months from mid-February 2024, bitcoin is up 86%, Tesla 83% and NVIDIA Corp (NASDAQ:NVDA) 99%. Meanwhile, MicroStrategy is up 379%.

The company is a bitcoin giant – it owns 2.243% of all the bitcoins that will ever come into existence.

Credit: Jason Koerner/Getty Images for Bitcoin Magazine.

Sol Strategies (HODL)

Sol Strategies Inc Ordinary Shares (CSE:HODL) is an acquirer of Solana (SOL), the fifth-most valuable blockchain by market capitalisation. Its blockchain is fast and cheap, which is why it has become the chain of choice for launching meme coins.

Solana is a so-called proof-of-stake blockchain, which means it doesn't mine in the way that bitcoin does, using up vast amounts of energy. Instead, Solana’s block validators verify the block transactions and are paid in SOL tokens for their work. The more SOL you stake the more competitive you are as a validator. Sol Strategies has been buying up validators, enabling it to generate an income stream for shareholders from these activities. Third parties can also delegate to the Sol Strategies validators, and the company takes its cut of those block rewards.

Whereas MicroStrategy relies on the bitcoin price to push up its share price and deliver capital returns, Sol Strategies has both capital appreciation and income to offer its shareholders.

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The risk-reward profile for Solana is likely much better than Ethereum, the second most-valuable blockchain. Like Solana, Ethereum can run decentralised applications (smart contracts – where business logic is programmed into token software, enabling responses to conditions or events in the real world, such as when an interest payment falls due or a network user makes a request, all without the need of intermediaries), but its transactions are expensive and slow. Given Solana’s next-generation technology, it might turn out to be a more suitable blockchain for running commercial applications at scale.

Sol Strategies has applied for a Nasdaq listing. Its primary listing is currently on the Toronto Securities Exchange (HODL) but is also available over the counter in the US under the CYFRF ticker symbol.

Recent corporate news saw a letter of intent to acquire one of the largest Solana validators, which would bring its total delegated staking to nearly 3 million SOL. As of 11 February, the company directly holds 218,903 SOL, valued at $43.7 million on 14 February.

Bear in mind that the stock trades at a very wide premium to NAV of around 10x and the stock is up 3,654% over the past 12 months. In addition to being richly valued, 27.78% of the stock is held by the chair Antanas Guoga. He also recently announced an increased investment in another Canadian-listed crypto company, Banxa.

Other options include:

Coinbase (COIN) – America’s biggest crypto exchange. Holds 9,480 bitcoin (17 February 2025). Led by CEO Brian Armstrong, Coinbase Global Inc Ordinary Shares - Class A (NASDAQ:COIN) came to market in April 2021 at an IPO price of $381. Going public in the teeth of the so-called crypto winter of the last bear market, meant a stock that lives or dies by its trading volume fee revenue, was always going to struggle.

Yet Coinbase has successfully diversified its business, expanding its custody and prime broking business targeting institutions. Income from the USD Coin (USDC) stablecoin is also a nice-little-earner because it gets a cut of the interest partners earn on the cash and near-cash instruments backing the stablecoin. It also generates earnings from securing blockchains.

The explosion in crypto trading after the election Donald Trump as US president for a second time, transformed Coinbase’s bottom line. In 2024, Coinbase revenue more than doubled to $6.56 billion and net income mushroomed from $94.9 million to $2.58 billion.

Block (XYZ) – provides financial services to consumers and merchants. It’s the biggest vendor of point-of-sale devices, which allow stores to process payments in the US, and it owns payments app Cash. Holds 8,363 bitcoin (17 February 2025). Block Inc Class A (NYSE:XYZ)’s two flagship products are its Square app for point-of-sale services and its Cash app, which is a digital wallet available to consumers in the US. The Cash app can handle both traditional money transactions and crypto.

Formerly called Square, Block went public in November 2015. Its Q4 2024 earnings were disappointing, triggering a share price slump. A class action lawsuit by aggrieved IPO investors alleges that Block failed to disclose lax regulatory compliance covering its apps. However, one analyst has upgraded Block based on an expected acceleration in gross profit growth from the apps.

Tesla (TSLA) – holds 11,509 bitcoin (17 February 2025). In February 2021, Tesla Inc (NASDAQ:TSLA) revealed it had bought bitcoin, but in May 2021 it reversed its initial intention to let bitcoin be used to buy Tesla cars. That followed CEO Elon Musk’s concerns about fossil fuels needed to mine bitcoin.

Still, valuing its bitcoin at $600 million accounted for a quarter of total net income of $2.3 billion in its fourth-quarter 2024 results. Although bitcoin is not accepted for payment, Tesla customers can use Dogecoin to buy branded merchandise and accessories in the Tesla Shop, but not Tesla cars.

A crypto-minded investment in Tesla would be based on hope rather than a well-founded expectation that the company will pivot to crypto.

US-listed bitcoin mining stocks:

Source: Morningstar. Market return data ($) to 31 January 2025. Stocks listed on Nasdaq. Argo Blockchain is also listed in the UK. Past performance is not a guide to future performance.

Miners and bitcoin owners:

Data February 2025.

Other US companies buying bitcoin or bitcoin ETFs:

Fathom Holdings Inc Ordinary Shares (NASDAQ:FTHM) – a real estate company with some cloud computing interests announced in January 2025 it would invest half its cash reserves into bitcoin.

Chief financial officer Joanne Zach’s rationale was as follows: “The integration of Bitcoin into commercial and financial strategies has accelerated across financial markets, positioning it as both a hedge against inflation and a safeguard against economic and currency risks in the global economy.”

Rationale: hedge against inflation and macro risks.

Cosmos Health Inc (NASDAQ:COSM) – healthcare company.

Rationale: hedge against inflation

KULR Technology Group Inc (AMEX:KULR) – thermal energy management. CEO Michael Mo told the Financial Times: “It is definitely a Micheal Saylor inspiration” and that he believes in “the bitcoin philosophy”. Will use 90% of excess cash to buy bitcoin.

Rationale: betting that bitcoin is the future of money.

Worksport Ltd (NASDAQ:WKSP) – sells protective covers for pickup trucks. Buying $5 million worth of bitcoin and XRP. Going forward, will commit 10% of excess cash to buying crypto.

Rationale: hedge against inflation.

Semler Scientific Inc (NASDAQ:SMLR) – biotech company. Holds bitcoin and Ethereum.

Rationale: hedge against inflation and currency devaluation.

Exodus Movement Inc Class A (AMEX:EXOD) – crypto wallet provider and vendor of other crypto-related software services to individuals and businesses. Holds 1,900 bitcoin in treasury as of 17 February 2025.

Rationale: as a crypto company it is putting its money where its mouth is and believes the value of bitcoin will rise against fiat currencies like sterling and the US dollar.

ETFs giving crypto exposure and available to UK investors:

Source: Morningstar. Market return (£) to 31 January 2025. Past performance is not a guide to future performance.

VanEck Crypto & Blockchain Innovators UCITS ETF (DAPP):

Top 10 holdings

Source: VanEck as at 31 January 2025.

As of 4 February, there are 79 publicly listed companies holding bitcoin and other crypto.

You can find a full regularly updated list of the companies and the size of their bitcoin holdings at the Bitcoin Treasuries website.