Blockchain technology is gaining traction as cryptocurrencies reach new highs and increase adoption. A way to get in on the action is by investing in blockchain stocks. We break down the benefits and risks of investing in them — and how to trade them.
Blockchain stocks are shares in companies like IBM (IBM) and Square (SQ) that use blockchain technology in their applications. Blockchain stocks are limited in major exchanges, but you can find stocks from businesses involved in blockchain technology — crypto mining hardware startups, Bitcoin exchanges, supply chains and more.
Blockchain technology uses a decentralized public ledger that records transactions and payments. It’s a peer-to-peer application — meaning no third parties — that paves the way for faster financial, medical and other transactions, each combined into timestamped blocks connected to one another in a never-ending chain.
With each passing year, it’s become more common for businesses to get involved in this rising technology. Even Google Cloud inked a deal in 2020 with venture-backed blockchain company Theta Labs that allows Google Cloud to run nodes of Theta’s blockchain network.
Why invest in blockchain stocks?
Blockchain is an emerging technology that can help companies conduct business more efficiently. Statista projects the size of the blockchain technology market to increase from $7 billion in 2021 to $39.7 billion by 2025.
Here are some ways blockchain can help companies grow their business and add value, which in turn could mean bigger profits for shareholders.
Security and privacy. The blockchain replaces sensitive data required to buy stocks, currencies, bonds and commodities with a secure token. That potential for stronger security and privacy makes it a highly sought-after technology for investors.
More efficient transactions. Blockchain helps companies settle transactions more quickly and efficiently than methods that rely on paperwork and processing of sensitive information. Records are encrypted and kept securely within a single digital ledger, saving time and money — and increasing value to investors.
Data security and privacy. Data on a blockchain ledger is signed, encrypted and cross-checked by the network. To hack into the ledger, you’d need access to each device holding a copy of the transaction history. By limiting the potential for data breaches, blockchain technology bolsters consumer — and investor — trust in a company over competitors.
Risks of investing in blockchain stocks
A look at the headlines can give any investor room to pause, what with spikes and dips that can vary by the hour, among other potential drawbacks.
Regulatory uncertainty. Governments around the globe are considering how to regulate cryptocurrencies in an effort to thwart their use in illegal transactions. Bitcoin and altcoins underlie blockchain technology, making its future unclear.
Volatile market. Based entirely on supply and demand, cryptocurrency is subject to rapid and unpredictable changes that make its value harder to predict than, say, currencies or stocks.
Blockchain stocks
Main stocks for you to invest in when putting your trust in the blockchain include:
Nvidia (NVDA). The company’s GPUs are vital hardware components when it comes to mining cryptocurrency. Mining hardware is not Nvidia’s main business, but it could become more important if cryptocurrency prices increase.
CME Group (CME). A main platform for buying Bitcoin futures, CME is fully regulated and gives investors a legal avenue for future Bitcoin price speculation.
Square (SQ). This merchant services company is a blockchain through its Cash App, helping users to more easily buy and sell Bitcoin. Square also has a team of bitcoin developers known as Square Crypto. More than $500 million in Bitcoin was sold on its platform in 2019.
IBM (IBM). IBM Blockchain offers solutions for clients like Kroger (KR) in the form of ticket-authentication company True Tickets. This stock could become more relevant if blockchain solutions continue gaining in popularity.
Canaan (CAN). This Chinese business makes hardware that is used in cryptocurrency servers and mining.
Bank of America (BAC). BofA has created a large number of blockchain patents — more than even Google or Microsoft.
Alibaba Group (BABA). Alibaba has amassed more than 100 blockchain patents and uses blockchain in such subsidiaries as Lynx International.
Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.
Company summary
NVIDIA Corporation operates as a visual computing company worldwide. It operates in two segments, GPU and Tegra Processor. The GPU segment offers processors, which include GeForce for PC gaming and mainstream PCs; GeForce NOW for cloud-based gaming; Quadro for design professionals working in computer-aided design, video editing, special effects, and other creative applications; Tesla for artificial intelligence (AI) utilizing deep learning, accelerated computing, and general purpose computing; GRID, which provides power of NVIDIA graphics through the cloud and datacenters; DGX for AI scientists, researchers, and developers; and EGX for accelerated AI computing at the edge. The Tegra Processor segment provides processors comprising SHIELD devices and services designed to harness the power of mobile-cloud to revolutionize home entertainment, AI, and gaming; AGX, a power-efficient AI computing platform for intelligent edge devices; DRIVE AGX for self-driving vehicles; Clara AGX for medical instruments; and Jetson AGX for robotics and other embedded use. The company's products are used in gaming, professional visualization, datacenter, and automotive markets. NVIDIA Corporation sells its products to original equipment manufacturers, original device manufacturers, system builders, add-in board manufacturers, retailers/distributors, Internet and cloud service providers, automotive manufacturers and tier-1 automotive suppliers, mapping companies, start-ups, and other ecosystem participants. NVIDIA Corporation was founded in 1993 and is headquartered in Santa Clara, California.
CME Group Inc., through its subsidiaries, operates contract markets for the trading of futures and options on futures contracts worldwide. It offers futures and options products based on interest rates, equity indexes, foreign exchange, agricultural commodities, energy, and metals, as well as fixed income products through its electronic trading platforms, open outcry, and privately negotiated transactions. The company also provides clearing for exchange-traded contracts and cleared swaps, as well as settlement services; and transaction lifecycle management services, such as trade and portfolio management, financial resource optimization, regulatory reporting, and trade processing. In addition, the company offers a range of market data services, including real-time and historical data services. It serves professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, governments, and central banks. The company has strategic partnership with B3 S.A. to develop risk management products for Brazilian domestic and international market participants. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group Inc. was founded in 1898 and is headquartered in Chicago, Illinois.
Square, Inc. provides, together with its subsidiaries, payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that offers sellers to payment and point-of-sale solutions. It provides hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards and Near Field Communication payments; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; Square Register that combines its hardware, point-of-sale software, and payments technology; Square Terminal, a portable payments device that replaces keypad terminals, which accepts various payment types, such as tap, dip, and swipe, as well as prints receipts; and managed payments solutions. The company also offers various software products, including Square Point of Sale; Square Virtual Terminal; Square Appointments; Square for Retail; Square for Restaurants; Square Invoices, Square Online Store; Square Loyalty, Marketing, and Gift Cards; and Square Dashboard. In addition, it offers developer platform, which includes application programming interfaces and software development kits. Further, it provides managed payments, instant transfer, Square Card, Square Capital, and payroll. Additionally, it provides Cash App, which enables to send, spend, and store money; and Weebly that offers customers website hosting and domain name registration solutions. Square, Inc. was founded in 2009 and is headquartered in San Francisco, California.
International Business Machines Corporation provides integrated solutions and services worldwide. Its Cloud & Cognitive Software segment offers software for vertical and domain-specific solutions in health, financial services, and Internet of Things (IoT), weather, and security software and services application areas; and customer information control system and storage, and analytics and integration software solutions to support client mission critical on-premise workloads in banking, airline, and retail industries. It also offers middleware and data platform software, including Red Hat that enables the operation of clients' hybrid multi-cloud environments; and Cloud Paks, WebSphere distributed, and analytics platform software, such as DB2 distributed, information integration, and enterprise content management, as well as IoT, Blockchain and AI/Watson platforms. The company's Global Business Services segment offers business consulting services; system integration, application management, maintenance, and support services for packaged software; finance, procurement, talent and engagement, and industry-specific business process outsourcing services; and IT infrastructure and platform services. Its Global Technology Services segment provides project, managed, outsourcing, and cloud-delivered services for enterprise IT infrastructure environments; and IT infrastructure support services. The company's Systems segment offers servers for businesses, cloud service providers, and scientific computing organizations; data storage products and solutions; and z/OS, an enterprise operating system, as well as Linux. Its Global Financing segment provides lease, installment payment, loan financing, short-term working capital financing, and remanufacturing and remarketing services. The company was formerly known as Computing-Tabulating-Recording Co. The company was founded in 1911 and is headquartered in Armonk, New York.
Canaan Inc. engages in the research, design, and sale of integrated circuit (IC) final system products by integrating IC products for bitcoin mining and related components primarily in the People's Republic of China. It is also involved in the assembly of system products; and supply chain and distribution of system products. The company has a strategic cooperation with Northern Data AG in the areas of artificial intelligence development, blockchain technology, and datacenter operations. The company was founded in 2013 and is based in Hangzhou, the People's Republic of China.
Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small- and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets segments. The Consumer Banking segment offers traditional and money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, and investment accounts and products; and credit and debit cards, residential mortgages, and home equity loans, as well as direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment offers investment management, brokerage, banking, and trust and retirement products; and wealth management solutions, as well as customized solutions, including specialty asset management services. The Global Banking segment provides lending products and services, including commercial loans, leases, commitment facilities, trade finance, and real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, and short-term investing options; working capital management solutions; and debt and equity underwriting and distribution, and merger-related and other advisory services. The Global Markets segment offers market-making, financing, securities clearing, settlement, and custody services, as well as risk management, fixed-income, and mortgage-related products. As of May 7, 2020, it served approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers; approximately 16,900 ATMs; and digital banking platforms with approximately 39 million active users. The company was founded in 1784 and is headquartered in Charlotte, North Carolina.
Alibaba Group Holding Limited, through its subsidiaries, provides online and mobile commerce businesses in the People's Republic of China and internationally. It operates through four segments: Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives and Others. The company operates Taobao Marketplace, a mobile commerce destination; Tmall, a third-party online and mobile commerce platform for brands and retailers; Alibaba Health Internet platforms for pharmaceutical and healthcare products; Alimama, a monetization platform; 1688.com and Alibaba.com, which are online wholesale marketplaces; AliExpress, a retail marketplace; Lazada, an e-commerce platform; and Tmall Global, an import e-commerce platform. It also operates Lingshoutong, a digital sourcing platform; Cainiao Network logistic services platform; Ele.me, a delivery and local services platform; Koubei, a restaurant and local services guide platform; and Fliggy, an online travel platform. In addition, the company offers pay-for-performance and display marketing services; and Taobao Ad Network and Exchange, a real-time bidding online marketing exchange. Further, it provides elastic computing, database, storage, virtualization network, large-scale computing, security, management and application, big data analytics, and Internet of Things and other services for enterprises; payment and escrow services; and movies, television series, variety shows, animations, and other video content. Additionally, the company operates Youku, an online video platform; Alibaba Pictures and other content platforms that provide online videos, films, live events, news feeds, literature, music, and others; Amap, a mobile digital map, navigation, and real-time traffic information app; DingTalk, a business efficiency app; and Tmall Genie, an AI-powered smart speaker. The company was founded in 1999 and is based in Hangzhou, the People's Republic of China.
Reality Shares NextGen Economy ETF (BLCN). Reality Shares and Nasdaq partnered to create this ETF that seeks long-term growth by tracking investments in the Reality Shares Nasdaq Blockchain Economy Index. It invests in large-cap tech stocks in developed markets. The fund has net assets of $188.34 million as of January 2021 and invests 31% of its assets in software and services.
Amplify’s Transformational Data Sharing ETF (BLOK). The BLOK ETF has an expense ratio of 0.70% and a price of $37.15 as of January 2021. It’s an actively managed fund that’s included such holdings as Square, Overstock (OSTK) and Taiwan Semiconductor (TSM).
Innovation Shares NextGen Protocol ETF (KOIN). This large-cap ETF invests in growth stocks and has Taiwan Semiconductor, Nvidia, and PayPal (PYPL) as its top three holdings. It has an expense ratio that’s higher than others at 0.95%.
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Crypto trading platforms
Popular among investors, cryptocurrency is mined using blockchain technology. Top online brokerages that let you trade blockchain stocks as well as cryptocurrency like Bitcoin include:
Webull. This commission-free trading platform offers detailed stock charts that allow for short selling. It’s ideal for active traders with less than $100K to use for funding — and for swing traders too.
TradeStation. This platform is ideal for higher-earning active traders with experience. It offers strong customer service and high-level market data to make informed trading choices.
TD Ameritrade. Both active traders and beginners can benefit from this quality trading platform. It also has $0 commissions on online stocks, options, and ETFs and good customer service.
The future of the blockchain industry
Worth $3 billion in 2021, the global blockchain technologies market is expected to reach $39 billion by 2025. Projections are supported by the fact that blockchain technology is beginning to mature, and companies are more confident they can use it to add value to their business.
A 2020 blockchain trends study from Deloitte found that 40% of businesses plan to invest more than $5 million in blockchain in 2021. Adopting this technology would mostly settle in data validation (43%), data access sharing (40%) and identity protection (39%). Today, more than 60% of blockchain’s market value is concentrated in the financial sector.
This doesn’t mean you should invest in blockchain stocks without due diligence. In fact, some companies have put “blockchain” in their names and saw share prices spike, without any clear evidence of whether it could add value to their business.
And keep in mind that the blockchain industry is young. A 2020 outlook study by Gartner notes that while it has the potential to transform industries and the overall economy, blockchain is expected to mature as it becomes more scalable and better integrates with, for example, AI and the Internet of Things.
Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.
Bottom line
Blockchain stocks can yield great results for those looking to invest in a disruptive, future-thinking technology. But don’t overlook the risks inherent in these highly unregulated and volatile investments.
Frequently asked questions
A cryptocurrency is a virtual currency that uses cryptography to secure financial and other transactions through a digital ledger called the blockchain. Among the most traded cryptocurrencies are Bitcoin and Ethereum.
Before investing in a blockchain stock, make sure you examine the financial statements of the company. You can find useful information on the company’s balance sheet and income statement, which you can usually find on the investor relations section of the company’s website. Online, you can also track the performance of a blockchain stock over time. Together, these can give you a good indication of the company’s financial health and where it can go in the future.
Blockchain is an emerging technology. But as described above, companies have seen its effectiveness in fields like logistics, financial services and data security. As blockchain matures, it can be adopted by more companies that can use it to add value. This can translate to bigger returns for blockchain stockholders.
Javier Simon is a freelance investing writer at Finder. He is a certified educator in personal finance (CEPF) with a bachelor's degree in multimedia journalism from SUNY Plattsburgh. He's been featured on NerdWallet, Bankrate, SmartAsset and other major finance websites. He loves writing content that helps people understand complex financial concepts, so they can make better financial decisions. When he's not writing and researching investing concepts, he likes going to rock concerts and the movies.
Despite the SEC issuing a lawsuit against Ripple last year – claiming XRP is an unlawful security – the cryptocurrency is showing 30-day gains of over 100%.
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