Why Stocks in the Bitcoin Universe Soared in October

The Bitcoin (BTC -0.71%) cryptocurrency rose 10.2% in October 2024, according to data from S&P Global Market Intelligence. As a result, stocks and funds with strong attachments to the biggest crypto also rose, often much faster. For example, these names in the world of Bitcoin saw strong price increases last month. They include Bitcoin itself and a popular S&P 500 (^GSPC -0.28%) index fund for your convenience:

Data collected from YCharts, FinViz and CoinMarketCap on 11/4/2024.

October’s Bitcoin Rally (and Related Price Increases)

Bitcoin itself experienced two distinct bursts of growth in October 2024. First, investors have embraced the Chinese government’s latest economic stimulus planwhich could increase demand for Bitcoin and other cryptocurrencies. Near the end of the month, many investors were in a speculative mood and drove prices higher for a host of high-risk investments — Bitcoin included. The speculative run was inspired by recent interest rate cuts and the upcoming presidential election.

The iShares Bitcoin ETF followed suit with Bitcoin’s price movements, as spot price funds are designed to do.

Riot Platforms shares rose as much as 46.5% in late October, but have suffered a sharp price cut over the past two days. The stock tends to amplify whatever the Bitcoin chart does. The positive moves are boosted by the company’s active investment in mining more digital currencies. Economic crises are taking a deeper toll on Riot, as those investments add risk to the business model. The price drop at the end of the month resulted from the company’s third-quarter earnings report, which fell short of analysts’ estimates overall. The halving of Bitcoin mining rewards in the spring has reduced Riot’s profit margins and added financial pressure to its operations.

And then, there’s MicroStrategy. The enterprise data analytics software specialist has become a very direct Bitcoin investment after converting most of its cash reserves into Bitcoin holdings and adding more Bitcoin through a variety of funding channels. This stock soared 53.2% before turning around on October 30. The company reported third-quarter results with disappointing sales and earnings, but dramatically expanded its Bitcoin buying program. MicroStrategy plans to raise $42 billion in capital over the next three years by raising debt and selling stock, investing the proceeds in more Bitcoin along the way. Shares often rise when MicroStrategy leaders unveil new plans to buy Bitcoin, but this particular announcement was too bold to inspire market optimism.

Putting the October wave into perspective

Viewing the returns of these Bitcoin-based investments for the entire year — starting with the introduction of spot Bitcoin ETFs on January 10 — underscores the risky but promising nature of crypto investing. MicroStrategy Is Rising, Riot Platforms Collapsed, and Simpler Bitcoin Assets Outpace the Stock Market in 2024:

MSTR given by YCharts

Crypto investors are still waiting for the positive Bitcoin price movements that tend to follow each halving its mining rewards. Institutional investors and other whales nibble the new exchange-traded funds (ETFs), but the largest ETF today represents only 0.04% of the total market value of Bitcoin.

So if you agree with the Bitcoin bulls and expect the digital currency to change the world in a dayit’s not too late to set up investments to take advantage of rising prices. Otherwise, you can join mainstream investor Warren Buffett on the sidelines, watching the cryptocurrency drama with no skin in the game. However, this new asset class is never boring.