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We continue to be cautiously optimistic that a bottoming formation is occurring across the crypto space.
Some of the Bitcoin miners we own in our portfolio such as HUT8 Mining (TSX: HUT Nasdaq: HUT) and Hive Blockchain (TSX-V: HIVE Nasdaq: HVBT) seemed to move in direct anticipation of the difficulty adjustment on July 3.
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The difficulty adjustment on July 3rd was widely expected to be a large downward retrenchment in response to the mass exodus of mining from China. It came in at 28%, the largest downward difficulty adjustment, ever.
This is good for the North American based miners we own in our portfolio because it means our companies will be using the same hashpower they had before the adjustment to mine against a lower network difficulty after it. It means more Bitcoin accumulated for our miners in the immediate near term. This is occurring as the cryptos seem to be forming a base ahead of the next leg up.
Two New Crypto Fund Stocks
If you’re looking to gain exposure to a straight basket of cryptos through a stock, this is an opportune moment to look at the Bitwise 10 Crypto Index Fund which trades as BITW on the US OTC market.
BITW simply holds a basket of 10 crypto-currencies:
The vast majority is Bitcoin and Ethereum, but through this vehicle you’ll also gain exposure to Cardano (ADA), Litecoin, Solana, Polygon and even a couple DeFi plays in Chainlink and Uniswap.
The only thing I don’t like in this fund is Bitcoin Cash, but it’s less than 1%. I’ve been holding ADA and Litecoin directly myself and have been doing some early research on Polygon, so overall I like the idea of a basket that gets you some exposure to these other cryptos.
Not only that, but the timing right now is fortuitous:
This chart shows the price of BITW (green line) compared to the Net Asset Value (NAV, blue line). We can see that earlier in the year the premium was dramatically higher that NAV. So much so that I think it would have been crazy to buy it then, and may even in hindsight have been an indicator that the up cycle was getting a little too frothy.
But now, the premium has all but evaporated and buying BITW at these prices is pretty close to simply buying the underlying crypto assets. It’s a great moment to pick up some exposure to a decent basket of crypto currencies, which the primary weighting still being Bitcoin and Ethereum.
The only caveat is I’m noticing Canadian registered accounts like RRSP and TFSA’s have some kind of restriction against buying OTC issues, but you should be able to buy them in a regular brokerage account. US readers shouldn’t have any problems.
Bitwise also has BITQ which is a basket of crypto stocks, kind of like what we do here at The Crypto Capitalist. Interesting to note that they hold a lot of the same stocks we do: Galaxy Digital, Hut8, Bitfarms, Coinbase, Silvergate Capital and BIGG Digital.
But they have a few in there I’m not really into: Microstrategy is their top holding. Some may wonder why we don’t own it. Michael Saylor has done a lot for Bitcoin, but I just think that there are better ways and better companies to hold if you want to get exposure to Bitcoin.
Also in the fund is Tesla and Ratuken who I don’t really think of as crypto stocks. I mention BITQ here again if you want a straightforward way to gain exposure to some of these companies in one shot.
I picked up some more Silvergate Capital (NYSE: SI) and Link Global Technologies (CSE: LNK PINK: LGLOF) today.
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