Investor's Guide to Blockchain Penny Stocks

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Blockchain is the technology behind Bitcoin and other cryptocurrencies. But there’s also a lot of interest in using blockchain as an application for other industries—especially financial, luxury goods, and any other industry where authentication is very important.

A blockchain allows multiple parties to collaborate without having to simply trust each other. With blockchain, in fact, the trust is baked into the technology. That is because no single entity controls the information involved in blockchain transactions.

The blockchain's structure allows for transparency of actions and the auditing of nearly any process or system.

Many companies, including giant ones like IBM and Walmart, are looking at how to offer blockchain-related services or to implement this new technology within their own businesses. Still other blockchain-associated companies are being formed as startups.

All of that means there are plenty of opportunities for investors to buy stock in a company that may benefit from increased use of this technology. Some of them are penny stocks, which are not listed on a major exchange (and so are said to trade over-the-counter), have low trading volume, and tend to cost less than $5 a share.

Key Takeaways

  • Blockchain is a technology that allows multiple parties to collaborate without having to trust each other.
  • Two interesting blockchain penny stocks are Canaan Creative (CAN) and Galaxy Digital Holdings (BRPHF).
  • You can also invest in cryptocurrencies directly or in exchange-traded funds.

Interesting Blockchain Penny Stocks

Penny stocks are always highly speculative, and penny stocks based on technologies that aren’t super proven are even more speculative. It’s important that you do your homework when buying any stock, but this is especially true with blockchain penny stocks.

Canaan (CAN)

Canaan is a Beijing-based company that manufactures hardware that can be used to mine Bitcoin. Canaan also uses its own computers to mine for Bitcoin in Kazakhstan. Canaan stock closed at $7.32 on July 2, 2021.

Galaxy Digital Holdings (BRPHF)

Galaxy Digital describes itself as a "diversified financial services and investment management company in the digital asset, cryptocurrency, and blockchain technology sector." It offers asset management and investment banking services for blockchain and digital asset companies. It also has its own Bitcoin mining operations and offers financing for other miners. Galaxy stock closed at $18.47 on July 2, 2021.

There are many other companies that use blockchain technology in some way, a few of which have Blockchain in their name. If you think the technology will gain in importance over time, you may wish to research companies that could stand to cash in on it.

How Else Can You Invest in Blockchain Tech?

There are a few other ways to try to make money from blockchain investing. The first and most obvious way is to buy a cryptocurrency itself. The most famous one is Bitcoin, but there are many others as well. The values of cryptocurrencies have increased dramatically at times over the last several years, but that does not mean they are a great investment for everyone.

Investing in cryptocurrencies is highly speculative.

Cryptocurrencies have no intrinsic value and are not issued or supported by a government. If you plan to make money from them over the long term, you will need to be right about these types of currencies someday being widely used in exchange for goods and services. Only a few companies accept them now, mostly for online retail purchases.

Some companies raise money through initial coin offerings (ICOs). Investors can profit if the value of the cryptocurrency rises after trading begins. The Securities and Exchange Commission warns that ICOs, which are mostly unregulated, can be fraudulent, and the value of the coins can be manipulated.

You might also consider buyings shares of exchange-traded funds (ETFs) that invest in companies that use blockchain technology. Many of the ETFs, which trade like stocks, track the performance of a benchmark blockchain-based index. Some examples are the Amplify Transformational Data Sharing ETF (BLOK) and the Siren Nasdaq NextGen Economy ETF (BLCN).

Final Thoughts on Blockchain Penny Stocks

Many people think that the blockchain technology is the real value of cryptocurrencies, so if you invest in companies that are utilizing this technology for real industry and that bet pays off, just maybe it will be like investing in Google at the very beginning. Only time will tell.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.