I’m sure you saw the news yesterday…
Bitcoin has a new corporate backer now that Tesla filed a document with the SEC stating that the company spent $1.5 billion to buy bitcoin.
The news sent ripples through financial markets.
Now investors are scrambling to interpret what this means for the future of cryptocurrency and how it will affect other players in the market and the global economy as a whole.
The price of bitcoin surged as soon as the news hit.
At the end of January, the digital currency was trading near $33,000.
This morning, bitcoin was trading near $46,000 (and could be much higher — or lower — by the time you read this).
That’s about a 40% gain over just a matter of days!
So I want to spend some time talking about what this could mean for bitcoin and the cryptocurrency market.
And I’ve also got some ideas on how you could cash in on this trend and build more wealth for your retirement.
Spoiler alert… I’m not going to recommend a direct investment in bitcoin. But I’ve got some other crypto ideas I think you’re going to like!
Tesla’s Move Injects Relevancy Into the Crypto Market
I’ll be frank with you; I haven’t been bitcoin’s biggest cheerleader.
As a retirement specialist, I feel it’s my job to help you grow your wealth while taking the least amount of risk possible.
After all, no one wants to watch their net worth swing up and down like a yoyo.
But this week’s announcement from Tesla may have kicked off a wave of change for cryptocurrencies.
And that wave is creating some big opportunities that can help you safely grow your wealth.
You see, Tesla didn’t just announce that they bought $1.5 billion in bitcoin in January…
The company also said that it would begin accepting payment from customers in the form of bitcoin.
You can access Tesla’s full SEC filing here.
The document is very long and has a lot of superfluous information. But it’s pretty easy to hit control+F on your computer and then type in “bitcoin” to find the nine mentions of it in the document.
By announcing that it will accept bitcoin for payments, Tesla made the cryptocurrency much more relevant in today’s market.
In the past, people have criticized cryptocurrencies like bitcoin by saying that they could really only use it to make fringe purchases — often for nefarious transactions to buy drugs, arms or for other criminal purposes.
But now, Tesla is making it easier to make legitimate consumer purchases — quite large ones at that — with bitcoin.
And this news is likely to be the start of a larger trend that offers more long-term support for bitcoin.
As Bitcoin Surges, These Stocks Are Worth More
In the past, I’ve compared the cryptocurrency market to the wild west gold rush nearly two centuries ago.
Some speculators made a fortune back in those days! And for every successful prospector, there were many more who never found the mother lode they were looking for.
The real winners were the outfitters, wagon makers, ranchers and other support businesses that kept the speculators going.
In the crypto world, there are similar companies that have businesses that profit from the speculation that seems to be spreading around the world.
Bitcoin miners certainly fit into this category.
These companies operate huge banks of computer servers that are constantly crunching numbers to solve puzzles that unlock various cryptocurrency coins.
(Yes, for those of you who are crypto enthusiasts, I know this is an oversimplification. But it helps to explain the process so we can all understand it a little better.)
These computer servers also serve the function of keeping cryptocurrency markets operational and registering the transactions that take place between buyers and sellers.
So essentially, these miners are the technology backbone keeping crypto markets moving.
Two publicly traded companies in this area are Riot Blockchain Inc. (RIOT) and Marathon Patent Group Inc. (MARA).
Since both of these companies are generating new coins day in and day out, the popularity and surging price of bitcoin has naturally pushed shares of these stocks higher.
Another company with an interesting tie to bitcoin is Morgan Stanley (MS). You and I know Morgan Stanley as a very profitable investment bank.
I like MS for several reasons, including the fact that the company benefits from a recovering economy (as businesses will need more of the financial services MS offers).
It also should do well in an era of rising interest rates (and we talked yesterday about how interest rates could be surging over the next few years).
But Morgan Stanley also owns 10% of a company called MicroStrategy Inc. (MSTR).
MicroStrategy currently owns 71,000 bitcoin — which, when valued near $46,000 per coin represents a $3.26 billion position.
Since MS owns 10% of MSTR, it essentially has a $326 million position in bitcoin.
Investing in legitimate businesses that will profit from the bitcoin market can be a much more stable way to participate in this exciting area compared to buying cryptocurrencies.
Now, I wouldn’t go out and buy shares of RIOT, MARA, MS or MSTR blindly today. These shares have all moved sharply higher as a result of bitcoin’s surge in price.
But all four of these companies should certainly be on your watch list for buying over time.
As with any volatile situation, I like the idea of deciding how much you want to invest and then breaking that number up into thirds or fourths.
Then you can invest one portion soon, another portion in a few weeks, and so forth…
That way you buy over time and you won’t fall into the trap of buying at the exact high before a significant pullback.
And you’ll also have money invested so you can participate in the rally if prices keep surging higher.
Today’s takeaway is that Tesla is injecting more relevancy into the cryptocurrency market and driving more long-term interest in bitcoin.
But rather than jump into a risky situation that could put your retirement wealth at risk, I’d prefer you to take a more stable approach to profiting from this dynamic market.