When it comes to investing in cryptocurrencies, there are a few options among Canadian stocks that investors can consider.
- First, they can buy the cryptos outright through qualified exchanges.
- They can also choose an ETF that tracks the price of crypto itself. At the moment, there are several Bitcoin and Ethereum ETFs for investors to choose from
- The last option is to invest in companies that operate in the space.
This is a little bit tricky as there have been a plethora of cryptocurrency stocks that have been listed on financial markets in recent years. In this article, we're going to go over some of the best that trade on the Toronto Stock Exchange.
Before we jump into some of the top Canadian crypto stocks, it's important to understand that this industry is still in its infancy
That means investing in crypto stocks is likely to bring considerable volatility, and these investments are only appropriate for those with a higher volatility tolerance. Those just learning how to buy stocks should realize these cryptocurrency stocks come with great financial risks.
The majority are also small to mid-caps, with little operational history to speak of, so the merits of the companies on this list can change in a flash. They don't really have a proven track record and are characterized by high risks.
These crypto stocks can also trade heavily on momentum, and swings in price on a daily or weekly basis can be substantial in either direction. The volatility will be one of the main drawbacks for conservative investors looking for exposure.
With that in mind, let's look at some of the top crypto stocks in Canada today that you can consider adding to your portfolio or watchlist. Of note, we could have filled this list with one type of crypto stock, but we decided to highlight a variety from different sub-industries in the crypto space.
What are the top Crypto stocks to buy in Canada?
Hut 8 Mining Corp (TSE:HUT)
Similar to the gold industry, which has gold producers, the crypto industry also has miners. Hut 8 (TSX:HUT) is a vertically integrated Blockchain, crypto mining, and HPC infrastructure company powering the future of Web 3.0 while innovating within the enterprise data industry.
It is the largest cryptocurrency miner in the industry, with a market capitalization of approximately $600 million.
It is also one of the few in the industry to be listed on the TSX Index, one of Canada's senior exchanges. Hut 8 has one of the highest installed capacity rates in the industry and holds more self-mined bitcoin than any other crypto miner or publicly traded company globally.
Assets include two mining sites in Alberta, one in Ontario, and various Web3 and data centre assets spread across Ontario and British Columbia.
Many Bitcoin miners immediately sell the Bitcoins created in the mining process. Hut 8 is different, choosing to hold every Bitcoin it earns. This makes it an ideal choice for investors looking for a pure-play Bitcoin miner. At the end of fiscal 2022, Hut 8 held 9,086 Bitcoins on its balance sheet and earned another 5.2 per day.
This is up considerably from the 2,761 Bitcoin it held as of the end of December 2020. This technology company has also greatly increased its mining potential, spending aggressively to add computing muscle. This bodes well for future production.
Much like gold miners and other companies with exposure to gold, which move in tandem with the price of gold, so too will Hut 8 with the price of Bitcoin. The investment thesis here is simple: Hut 8 is a bet on Bitcoin.
We'll also note that despite Bitcoin's massive run-up in the last few years, Hut 8 isn't consistently profitable. It reported negative earnings in 2018, 2021, and once again in the past year, although recent losses have been partially caused by external factors, specifically the price of Bitcoin.
By now, I'm sure you've heard of the term Metaverse. Did you know the first publicly listed Metaverse company wasn't actually Facebook but was a little-known company on the NEO exchange called Tokens.com (NEO:COIN).
Tokens.com began as a staking pure-play, in which it bought and staked crypto and earned rewards simply for hanging onto that portfolio of holdings.
However, it has evolved into a Metaverse play and began making waves in space a little over a year ago. It is the majority owner of Metaverse Group, an NFT-based virtual real estate owner and developer.
Through Metaverse Group, Tokens.com recently made the single largest purchase in Metaverse history when it picked up a 116-parcel estate in Decentraland's coveted Fashion district. The transaction cost was 618,000 MANA, which was valued at close to $3M at the time.
The company has also started working with major brands to build Metaverse advertising portals, web-based virtual stores that advertise a company's product to various buyers, with an emphasis on Generation Z.
These virtual stores allow greater interaction than a regular website, longer dwell times, and help the company gain valuable word-of-mouth advertising.
Circling back to staking, the company has Ethereum, Polkadot, Solana, Oasis, Terra, Shiba Inu and Ankr Tokens, which are fully staked. As of the end of its most recent quarter, it has approximately $16 million in cash and digital assets, compared to a current market cap of approximately $12 million.
If you are looking for a play in the Metaverse, none is further along than Tokens.com. However, like every company in this list, investors will likely see more volatility in the stock as issues like prices of cryptocurrencies and the general sentiment surrounding the industry impact the stock price and earnings per share (EPS).
Valour Inc (NEO:DEFI)
Valour Inc. (NEO:DEFI) -- which was formerly known as Defi Technologies - -is quickly establishing itself as a leading decentralized finance company. Their mission is to bridge the gap between traditional capital markets and finance. It aims to identify opportunities to innovate, build and invest in new technologies and ventures in the DeFi space.
The company has been growing at a rapid pace through acquisition, and its main subsidiary, Valour Inc., had US$339M in assets under management as of November 2023. Valour is responsible for its suite of exchange-traded products (ETPs), which trade on various exchanges globally.
For example, it launched a Solana ETP on the Nordic Exchange and Valour ETPs on the Frankfurt Exchange in mid-2021.
Also worth noting is the experience of Valour's senior management team, including CEO Olivier Roussy Newton, who co-founded HIVE, one of the largest crypto companies on the TSX, and Russell Starr, the former CEO of Trillium Gold.
It also has Anthony Pompliano as an advisor, who is one of the most influential voices in the sector.
The company has also begun running nodes for DeFi protocols. It entered into an initial contract with Paycase to provide a node for its Shyft network. DeFi Tech earns revenue as it gets a fee for each transaction on the network.
The company is also in the staking game, and once the public purchases the ETP certificates, DeFi can, in turn, stake those in the network and earn interest. As the company puts it, "The beauty is: DeFi Technologies has no exposure risk to the underlying."
Hive Digital Technologies (TSXV:HIVE)
Hive Digital Technologies (TSXV:HIVE) is the owner and provider of various digital infrastructure for emerging technologies.
It primarily exports efficient, clean and renewably sourced computing power to customers around the world, as well as using its technology to mine Bitcoin as well.An investment in Hive follows much of the same logic and maybe a better choice for investors with a reduced risk appetite.
However, I don't want anyone to assume this Canada-based technology company is some sort of blue-chip stock.
It still has a strong reliance on the overall health of the crypto market, especially Bitcoin. But it is more of a blue-chip name in the crypto sector, with a market cap of nearly $350 million, a strong management team, and one of the better cost structures of any company in the industry.
This translated into profitable operations in both 2021 and 2022. Analysts are also relatively bullish, with two-thirds of analysts who cover the stock saying it's a buy and one-third saying it's a hold. No analysts have either a strong buy or strong sell ranking.
Like Hut 8, Hive is a digital miner that keeps much of its production on its balance sheet, making it an indirect way for investors to bet on the price of Bitcoin. But where it differs is it has periodically sold some of its digital assets to buy more mining assets, which are then used by other miners.
Hive is preferred by many public market investors because of its larger size, diversification away from Bitcoin itself, and the level of experience of senior management. In other words, it has a little more corporate feel and a little bit less of a start-up vibe.
Ether Capital Corp (NEO:ETHC)
This is the third company on our list to be listed on the NEO Exchange. The NEO is quickly becoming a hotbed for innovative companies and products, so it is no surprise that many crypto and blockchain technology companies are choosing to list with NEO.
Ether Capital (NEO:ETHC) is an interesting one. It is a public technology company focused on Ethereum staking, yield generation, and providing direct access to the Ethereum ecosystem. If you're looking to make a bet on the Ethereum network, this is a good place to start.
The company has excellent management, including a bit of a celebrity as Executive Chairman. Som Seif is best known as a leader in bringing ETFs to Canada with Claymore Investments, which was sold to Blackrock in 2012.
He's also a co-founder of Wealthsimple. He's also one of the company's biggest shareholders, obviously a big believer in Ethereum-based businesses.
The company makes money in three ways. First, it provides consulting services and professional advice to those in the space.
For example, it has acted as a consultant to Purpose Investments and helped launch the Purpose Bitcoin and Purpose Ether ETFs, which allow Canadians to hold cryptocurrency in CAD and, as an added bonus, can tax shelter the holding.
Make no mistake: Ether Capital is a big player in the Ethereum ecosystem.
Secondly, the company is investing in the development of technologies which are aimed at decentralized application adoption.
Third, and perhaps most importantly, the company acts as an asset manager for several crypto holdings – primarily Ether. As of writing, the company had approximately $134M of ETH on the balance sheet, as well as smaller investments in various other cryptocurrencies.
In comparison, the company only has a market cap of $54M. That means it is trading at more than a 50% discount to ETH holdings. While most asset management firms do trade at a discount to assets due to overhead costs, the big gap here is unwarranted.
It is likely why the company announced an NCIB and has consistently repurchased shares since. As of September 2023, it had repurchased more than 261,000 of its shares. The company's shares are undervalued, and management recognizes this.
How can you take advantage? Whenever the discount to ETH assets is greater than 30%, it provides an attractive risk-to-reward prospect.
Of course, this stock will be dependent on Ethereum, but so long as one is bullish on ETH, Ether Capital has the potential to deliver outsized returns. However, like the rest of the stocks on this list, ETHC is a volatile name, so perhaps a smaller investment amount set aside for this stock would be prudent.