Investing in These Bitcoin Stocks Is Not for the Faint-Hearted

As Bitcoin use grows, more and more companies are springing up to exploit the unique capabilities of the digital currency, and that means we're seeing more cheap Bitcoin stocks coming to market.

In fact, pretty much all the Bitcoin stocks that have appeared so far are penny stocks. Larger start-ups, like Bitcoin ATM companies Robocoin and Lamassu, may go public at some point, but until then we're left with the Bitcoin penny stocks.

Most of the micro-cap companies involved with Bitcoin have businesses focused on forms of payment, and some are promising.

But if you're thinking of investing in Bitcoin penny stocks, it's important to keep in mind all the caveats that apply to penny stocks in general.

Such as: Penny stocks typically are not very liquid, meaning the volume of shares traded every day is fairly low. That means it can be hard to exit a stock when things turn against you, which can lead to even bigger losses.

That low volume, coupled with their extremely low prices, can make penny stocks subject to wild price swings. And that leaves them vulnerable to manipulation by unscrupulous "pump-and-dump" operators.

Plus, most are lightly regulated because they trade "over the counter" (OTC) as opposed to on a major exchange such as the New York Stock Exchange. That means fewer required public filings, which gives investors less information.

[To learn more about these wild-moving investments, read What Are Penny Stocks?]

Adding Bitcoin to mix doesn't help. Bitcoin penny stocks carry the additional risk of getting hammered by bad Bitcoin news, such as the Mt. Gox bankruptcy.

And yet along with the high risk comes the potential for huge rewards. A Bitcoin penny stock, if it succeeds, could rise 200% or 300%.

Of course, many Bitcoin penny stocks will go under. It's just the nature of the beast. So if you're planning on investing in Bitcoin penny stocks, make sure you allocate only a tiny portion of your portfolio - money you're comfortable losing entirely.

That said, let's take a look at a few Bitcoin penny stocks that people are talking about...

David Zeiler

About the Author

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David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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