How to invest in blockchain stocks

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.

What are blockchain stocks?

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.

• NVIDIA Corporation (NVDA.US)

  Company summary

  NVIDIA Corporation operates as a visual computing company worldwide. It operates in two segments, Graphics and Compute & Networking. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems. The Compute & Networking segment offers Data Center platforms and systems for AI, HPC, and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; and Jetson for robotics and other embedded platforms. 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 has partnership with Google Cloud to create AI-on-5G Lab. NVIDIA Corporation was founded in 1993 and is headquartered in Santa Clara, California.

  Historical performance

  Stock information

  • Market capitalization: $582480101376
  • P/E ratio: 72.0752
  • PEG ratio: 2.5741
  • Dividend yield: 0.0007%

  Get more detailed information and learn how to buy NVDA.US stock

• CME Group (CME.US)

  Company summary

  CME Group Inc., together with 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.

  Historical performance

  Stock information

  • Market capitalization: $80214261760
  • P/E ratio: 32.9189
  • PEG ratio: 5.0604
  • Dividend yield: 0.0161%

  Get more detailed information and learn how to buy CME.US stock

• Square (SQ.US)

  Company summary

  Block, Inc., together with its subsidiaries, creates tools that enables sellers to accept card payments and provides reporting and analytics, and next-day settlement. 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 payments device and receipt printer to replace traditional keypad terminals, which accepts tap, dip, and swipe payments. The company also offers various software products, including Square Point of Sale; Square Appointments; Square for Retail; Square for Restaurants; Square Online and Square Online Checkout; Square Invoices; Square Virtual Terminal; Square Team Management; Square Contracts; Square Loyalty, Marketing, and Gift Cards; and Square Dashboard. In addition, it offers a developer platform, which includes application programming interfaces and software development kits. Further, the company provides Cash App, which enables to send, spend, and store money; and Weebly that offers customers website hosting and domain name registration solutions. It serves in the United States, Canada, Japan, Australia, and the United Kingdom. The company was formerly known as Square, Inc. and changed its name to Block, Inc. in December 2021. Block, Inc. was founded in 2009 and is headquartered in San Francisco, California.

  Historical performance

  Stock information

  • Market capitalization: $54476693504
  • P/E ratio: 118.4554
  • PEG ratio: 1.4005
  • Dividend yield: 0%

  Get more detailed information and learn how to buy SQ.US stock

• International Business Machines Corporation (IBM.US)

  Company summary

  International Business Machines Corporation provides integrated solutions and services worldwide. Its Cloud & Cognitive Software segment offers software for vertical and domain-specific solutions in various application areas; and customer information control system and storage, and analytics and integration software solutions to support client mission on-premise workloads in banking, airline, and retail industries. It 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; and finance, procurement, talent and engagement, and industry-specific business process outsourcing services. Its Global Technology Services segment provides IT infrastructure and platform services; and 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. It has a collaboration with GK Software SE to enhance retail innovation and customer omnichannel experience with hybrid cloud technology; and with Apptio, Inc. The company was formerly known as Computing-Tabulating-Recording Co. The company was incorporated in 1911 and is headquartered in Armonk, New York.

  Historical performance

  Stock information

  • Market capitalization: $115939000320
  • P/E ratio: 24.4842
  • PEG ratio: 2.4858
  • Dividend yield: 0.0507%

  Get more detailed information and learn how to buy IBM.US stock

• Canaan (CAN.US)

  Company summary

  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.

  Historical performance

  Stock information

  • Market capitalization: $974915200
  • Dividend yield: N/A%

  Get more detailed information and learn how to buy CAN.US stock

• Bank of America Corporation (BAC.US)

  Company summary

  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. Its Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit 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 company's Global Wealth & Investment Management segment offers investment management, brokerage, banking, and trust and retirement products and services; and wealth management solutions, as well as customized solutions, including specialty asset management services. Its Global Banking segment provides lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, and short-term investing options and merchant services; working capital management solutions; and debt and equity underwriting and distribution, and merger-related and other advisory services. The company's Global Markets segment offers market-making, financing, securities clearing, settlement, and custody services, as well as risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. As of April 15, 2021, it served approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers; approximately 17,000 ATMs; and digital banking platforms with approximately 40 million active users. The company was founded in 1784 and is headquartered in Charlotte, North Carolina.

  Historical performance

  Stock information

  • Market capitalization: $367628845056
  • P/E ratio: 12.5826
  • PEG ratio: 1.015
  • Dividend yield: 0.0187%

  Get more detailed information and learn how to buy BAC.US stock

• Alibaba Group Holding (BABA.US)

  Company summary

  Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to merchants, brands, retailers, and other businesses to engage with their users and customers 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 social commerce platform; Tmall, a third-party online and mobile commerce platform for brands and retailers; Alimama, a monetization platform; 1688.com and Alibaba.com, which are online wholesale marketplaces; AliExpress, a retail marketplace; Lazada, Trendyol, and Daraz that are e-commerce platforms; and Tmall Global and Kaola, which are import e-commerce platforms. It also operates Lingshoutong that connects FMCG manufacturers and their distributors to small retailers; Cainiao Network logistic services platform; Ele.me, an on-demand 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, in-feed, and display marketing services; and Taobao Ad Network and Exchange, a real-time online bidding marketing exchange. Further, it provides elastic computing, database, storage, virtualization network, large-scale computing, security, management and application, big data analytics, machine learning platform, and Internet of Things services. 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-enabled smart speaker. The company was incorporated in 1999 and is based in Hangzhou, the People's Republic of China.

  Historical performance

  Stock information

  • Market capitalization: $354015150080
  • P/E ratio: 17.2736
  • PEG ratio: 1.7121
  • Dividend yield: 0%

  Get more detailed information and learn how to buy BABA.US stock

What ETFs track blockchain stocks?

Three main ETFs track blockchain stocks are:

• 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.

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

• What is a cryptocurrency?

  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.

• How do I choose which blockchain stock to invest in?

  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.

• What can we expect from blockchain moving forward?

  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.