Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Bitcoin 101: Why Are Crypto Stocks Volatile?

Stock MarketsOct 28, 2021 16:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
Bitcoin 101: Why Are Crypto Stocks Volatile?

It’s been almost a year, and the crypto hype hasn’t gone. The 2017-2018 crypto bubble lasted for around 10 months before it burst. But this time, hype continues, as big names are getting involved. From Elon Musk to Mark Cuban, visionaries are realizing the power of crypto, while regulators are cracking down on private coins. This tug of war between accepting and rejecting cryptocurrency as an alternative currency is driving volatility, making Bitcoin and other crypto-related stocks risky.

The regulatory and economic impact of crypto The whole concept of crypto is to create an alternative to the centralized authority, which banks and governments hold over currency. At present, fiat money is in circulation, and the governments of the respective countries have absolute control over it. This control allows them to fund their increasing budget deficit by printing more money without any gold collateral.

With private cryptocurrencies, fiat money has a competitor. Cryptocurrency will decentralize the transaction and give all participants in the blockchain network the power to validate a transaction. If cryptocurrencies start circulating and become an accepted form of payment, the value of fiat currency issued by central banks could fall. This could reduce their spending power. Moreover, central banks could lose control over the money supply.

Decentralization of currency could have repercussions. There could be terrorist funding, money laundering, and many other social evils, and no law to keep them in check. Hence, countries like China have banned cryptocurrency. This regulatory crackdown will take a while to ease.

The issues around acceptance of crypto In the meantime, big companies like Tesla (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT) are looking to accept payments in cryptocurrencies. They are working out the technical issues with blockchain technology and the safety of crypto platforms from hackers. But even they are skeptical about crypto because of the volatility in the price.

If you remember, in the early days of Bitcoin, people used it to buy pizza. Today the BTC price is close to $73,000. Now, that one expensive pizza. The opposite is also true, as crypto prices also fall. Hence, many people are not accepting cryptocurrency over fears that currency’s value might drop in the future.

This on-off decision of companies to accept cryptocurrency is adding to the volatility. So much drama around every aspect of crypto makes you wonder if it is a smart decision to invest in crypto.

Is it smart to invest in crypto? Crypto has its supporters, critics, and skeptics. It is a high-risk investment that can go either way, and there is no fundamental analysis that can help predict its move. Three major outcomes can happen:

  • Crypto could gain acceptance as a widely accepted currency.
  • Crypto could perish once again on the regulatory crackdown, like the 2018 bubble burst.
  • Or regulators could come up with a way in which crypto would not impact their spending power.
In this whole fiasco, you can get handsome returns from the crypto volatility through crypto-related stocks. But if you want to earn big, be prepared to lose big, too.

How to earn from Bitcoin volatility I wouldn’t suggest buying crypto coins directly. But you can invest in crypto-mining companies whose stocks trade on the Toronto stock exchange. They operate just like stocks, but their price is influenced by Bitcoin price. For instance, Hive Blockchain Technologies (TSXV:HIVE)(NASDAQ:HVBT) is one of the oldest blockchain companies trading on the exchange. Some experts say that technical analysis makes BTC predictable, and that can help you earn some returns.

Hive stock has been hovering in the $3-$5 range since July. After a recent optimism, there has been a correction, but the stock is still not oversold. This means there is more downside potential. The fact that this stock moves double digits on any news can work in your favour. You can buy the stock when it dips below its 200-day moving average of $3.5 and sell it in another wave. For instance, the stock fell to $3.38 towards the end of September. If you bought it then and sold it today, you would earn 25% in a month.

Or you can take a different approach and hold Hive stock for a decade if you believe in the future of crypto.

The post Bitcoin 101: Why Are Crypto Stocks Volatile? appeared first on The Motley Fool Canada.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Microsoft and Tesla. Fool contributor Puja Tayal has no position in any of the stocks mentioned.

This Article Was First Published on The Motley Fool

Bitcoin 101: Why Are Crypto Stocks Volatile?

Related Articles

My Top 4 Canadian Stock Picks for December 2021
My Top 4 Canadian Stock Picks for December 2021 By The Motley Fool - Nov 26, 2021

Canada reported its highest inflation in 18 years of 4.7% in October, as the world grapples with the energy crisis. The month of December could see energy prices peak as the United...

Canada Housing Is on Fire: 3 TSX Stocks to Buy Today
Canada Housing Is on Fire: 3 TSX Stocks to Buy Today By The Motley Fool - Nov 26, 2021

When this year started, I’d discussed why the Canada housing bull market was well positioned to press on due to strong fundamentals and favourable monetary policy. Canadian...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email