7 Ways to Trade Bitcoin Right Now

A number of stocks have made investments in cryptocurrencies

Nov 30, 2017 at 2:57 PM
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I've tried my best to stay away from bitcoin (BTC) mania, but it's everywhere, pervading the financial news landscape more and more each day. One day there are headlines about the cryptocurrency rising 50%, the next it's falling 20%. At last glance, it was trading at $9,685.52, just a day after hitting an all-time high of $11,395.

Throughout it all, bitcoin and its peers have attracted critics and fanatics alike. JPMorgan Chase CEO Jamie Dimon has called BTC "dumb," but then John McAfee just this week said it's going to $1 million. You'll have to do your own due diligence on bitcoin and decide if it's a once-and-a-lifetime investment or a historic bubble. In the meantime, we'll just discuss a few ways to get exposure to the cryptocurrency through other investment vehicles, such as stocks and exchange-traded funds (ETF).

RIOT, MARA, GROW Stocks a Play on Bitcoin Miners

The first stock worth discussing is actually a biotech, or was a biotech, that being Riot Blockchain Inc (NASDAQ:RIOT). The company made a huge splash earlier this year when it announced an investment in a large number of bitcoin mining machines. RIOT stock has since made a number of huge moves, with the shares peaking at $24 last Friday, but were last seen trading at just $12. Another name that soared on bitcoin news was Marathon Patent Group Inc (NASDAQ:MARA), which bought bitcoin miner Global Bit Ventures, while investors cheered U.S. Global Investors, Inc.'s (NASDAQ:GROW) cryptocurrency investment, as well.

Interestingly, both these stocks have seen large influxes in options trading. Total open interest for MARA is currently at a 52-week peak, while open interest for GROW ranks in the 99th annual percentile. Action on both has been very call-skewed, with their respective call/put volume ratios coming in at 2.60 and 5.47, across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). As such, it would seem options traders are expecting more upside from MARA and GROW stocks.

Semiconductor Stocks Get In the Bitcoin Craze

A few chip stocks have also enjoyed some cryptocurrency-related tailwinds this year. For example, a number of analysts waxed optimistic on NVIDIA Corporation (NASADQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD), since their chips are used to mine digital currencies. And these bull notes go as far back as June. (Full disclosure: despite spending an exorbitant amount of time on YouTube and in discussion with friends about the concept, "mining" bitcoins is unfathomable to me and I've given up trying to understand).

Something else AMD and NVDA stocks have in common is that they've been prone to making huge moves over the past year, based on their respective Schaeffer's Volatility Scorecard (SVS) of 88 and 99. This means they've regularly topped options traders' expectations over the past year.

Square, Another Bitcoin Winner

Maybe one of the more surprising pieces of BTC news came from mobile payments specialist Square Inc (NYSE:SQ). Just this month the company announced it would allowed certain customers to buy and sell bitcoin. Meanwhile, this news helped fuel some major profits for SQ options traders. The equity may now be presenting a buying opportunity, but short sellers continue to hammer it. In fact, short interest on Square stock just touched a record high, with 10% of its float wrapped up in these bearish bets.

Is a Bitcoin ETF In Your Future?

The next step for bitcoin will likely be ETFs, as exchanges prepare to list bitcoin futures in the coming months. Though the Winklevoss Bitcoin Trust ETF (COIN) got rejected by regulators, there are a number of other bitcoin ETFs in the works. Until then, investors are stuck with ARK Web x.0 ETF (ARKW), which features Bitcoin Investment Trust (GBTC) as its second largest holding. For what it's worth, shares of ARKW have gained 81% this year, and hit a record high of $46.99 just yesterday. The security was last seen trading at $45.45.

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