Investing in Bitcoin Penny Stocks: Beware of These Pitfalls

Bitcoin penny stocks may not be an ideal way to invest in Bitcoin, but if you're looking for equities in this category, your options are limited.

For sure, there's no shortage of Bitcoin companies. Hundreds of Bitcoin companies have launched in the past few years. And while hundreds of millions of dollars of venture capital has poured into these companies, none has reached the stage where it's ready for an initial public offering.

But we do have an array of Bitcoin penny stocks.

Some of these came about through reverse mergers, in which a private company buys a publicly traded company to acquire the stock symbol. Others were penny stocks in a completely different business that decided to jump on the Bitcoin bandwagon after the digital currency gained notoriety in 2013.

And sometimes they shift gears again when things don't go well - like SolPower Corp.

A little over a year ago, this software company changed its name to Bitcoin Collect. Its stated goal was to "totally dominate the Bitcoin space" with its Bitcoin-based payment cards. Four months later, the company abandoned Bitcoin and changed its name to Good Vibrations Shoes.

The company's new goal is to "augment the lives of people with diabetes, swelling and cold, achy feet."

The strange saga of SolPower is just one reason investing in penny stocks can be so dicey. But there are several other risks investors need to keep in mind when they venture into these murky waters.

The Risks of Investing in Penny Stocks

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

That low volume - and 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.

Still, penny stocks have a lot of fans. That's because along with the high risk comes the potential for huge rewards. A Bitcoin penny stock, if successful, could rise 200% or 300% in a very short time.

On the other hand, many will implode. It's the nature of the beast. So if you're planning on investing in Bitcoin stocks, please proceed with maximum caution and allocate only a small portion of your portfolio.

That said, here are some of the Bitcoin penny stocks you can buy...

Seven Bitcoin Penny Stocks You Can Buy Now

This list should get you started:

• Bitcoin Shop Inc. (OTCMKTS: BTCS): Probably the best bet in the universe of Bitcoin penny stocks. The Bitcoin Shop, based in Silver Spring, Md., is an online marketplace that accepts digital currencies such as Bitcoin for payment. BTCS was founded in 2013 and has maintained a stable and growing business. Bitcoin Shop stock trades at about $0.16 and is up 100% in 2015.

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]

• Global Future City Holding Inc. (OTCMKTS: FTCY): Global Future City Holding has come up with a truly unique business idea. It takes advantage of an obscure immigration program, the EB-5 visa. Under this program, an alien who invests $500,000 in a "regional center," an area the government has targeted for employment growth, may immigrate to the United States. Global Future City is acquiring real estate projects that fit these requirements. And it's created its own Bitcoin-like cryptocurrency, E-Gold, to facilitate the transactions and provide the infrastructure for a loyalty rewards program. Crazy, but it just might work. FTCY trades at about $3.09. It's up a stunning 1,112% in 2015.
• Bayside Corp. (OTCMKTS: BYSD): Dallas-based Bayside was an oil and gas venture until 2013. Now, through its subsidiary Bitcoinz USA, Bayside operates an automated Bitcoin exchange and offers secure offline storage for the digital currency. BYSD trades at about $.0004 a share. It's flat on the year, though in March was up as much as 375%.
• Avra Inc. (OTCMKTS: AVRN): Based in Jamaica, AVRN entered the world of Bitcoin in November. It focuses on Bitcoin-based payment solutions, including "AvraPay," which allows merchants to accept Bitcoin and AvraATM, a system to make bill pay kiosks Bitcoin-compatible. The idea is to make using Bitcoin easier. AVRN trades at about $0.24 and is down 44% in 2015.
• American Green Inc. (OTCMKTS: ERBB): Formerly known as Tranzbyte, American Green in the past year has shifted its focus to the retail supply chain of the growing cannabis industry. Its connection to Bitcoin is its ZaZZZ marijuana vending machines, which accept Bitcoin as a payment option. ERBB trades at about $0.0030 a share. It's down 77% on the year.
• Bit-X Financial Corp. (OTCMKTS: BITXF): Vancouver-based Bit-X Financial launched its new Bitcoin exchange, Digatrade, at the end of June. Digatrade will also offer multi-currency payment processing. For now it only works with Canadian dollars, but the company has plans to expand to U.S. dollars, euros, and British pounds as well. BITXF trades at about $0.18 and is down 10% in 2015.
• Microelectronics Technology Co. (OTCMKTS: MELY): Monarch Bay, Calif.-based Microelectronics is a cloud computing company that operates its own Bitcoin mining pool, BTC Pool Party. Investing in this Bitcoin penny stock is an indirect way to invest in Bitcoin mining. MELY closed at $.00010 on Friday. It's down 99.9% in 2015 (it opened the year at $0.10).

Follow me on Twitter @DavidGZeiler.

Is Bitcoin a Ponzi Scheme? Bitcoin critics love to knock the digital currency as a Ponzi scheme and have done so for a long time. But when you study Bitcoin and Ponzi schemes, it quickly becomes obvious that they don't have anything in common. Here's why this persistent accusation has no basis in fact...