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…