Don’t miss:
- Commission creep is real. Stop high fees from eating into your investments with this free app
- This surprising asset class is up 14%. Here's how to bolster your portfolio with a shockproof alternative investment
- Is your family protected financially? These are 5 simple mistakes Canadian parents make when it comes to life insurance
Buy Bitcoin
The liquidity crunch at FTX has triggered a sell-off in the crypto world. Bitcoin, for instance, has plunged 19 per cent over the last five days, bringing its year-to-date loss to a painful 74 per cent.
But as the world’s largest cryptocurrency, Bitcoin still has a huge following and an increasing number of companies worldwide are using it.
Michael Saylor, CEO of MicroStrategy — an analytics platform — recently said that Bitcoin is “100x better than gold.” If Bitcoin reaches the size of gold as an asset class, Saylor predicts that it could go to $500,000 a coin.
Considering where Bitcoin is trading right now, $500,000 implies a potential upside of over 2,800 per cent.
These days, many platforms allow individual investors to buy and sell crypto. Just be aware that some exchanges charge up to four per cent commission fees for each transaction. So look for investment apps that charge low or even no commissions.
While Bitcoin commands a five-figure price tag today, there’s no need to buy a whole coin. Most exchanges allow you to start with as much money as you are willing to spend.
Crypto funds
People have long been using funds to gain diversified exposure to a market or a specific segment of that market. As it turns out, you can do that with cryptocurrencies as well.
For instance, the Bitwise 10 Crypto Index Fund (BITW) tracks an index made up of the 10 largest crypto assets (weighted by market capitalization). Because cryptocurrencies are often highly volatile, the index is rebalanced monthly to stay up to date with the rapidly changing market prices.
BITW’s five largest holdings are Bitcoin (61.8 per cent), Ethereum (28.7 per cent), Cardano (2.3 per cent), Polygon (1.8 per cent) and Polkadot (1.3 per cent).
What to read next:
- A guide to the best Canadian high-interest savings accounts in 2022
- How to recession-proof your finances right now
- What are advisors doing (or not doing) with their own portfolios in a bear market?
Crypto stocks
What happened at FTX serves as a reminder that crypto companies can be risky, but there are more entrenched players in the business.
While Coinbase shares have experienced plenty of volatility — they’re down 78 per cent year to date — some analysts see a rebound on the horizon. Citi analyst Peter Christiansen has a "buy" rating on Coinbase and a price target of $80, implying a potential upside of 48 per cent.
There’s also PayPal (PYPL), which is not a crypto pure-play. The company is deeply entrenched in the digital payment industry. But because PayPal also allows users to buy, sell, and hold crypto on its platform, it’s a name worth considering if you are looking for diversification.
PayPal shares have plunged by 54 per cent in 2022. BMO Capital Markets analyst James Fotheringham has an "outperform" rating on PayPal and a price target of $109 — roughly 22 per cent above where the stock sits today.
