What happened

Many cryptocurrency stocks posted strong gains in January, according to data from S&P Global Market Intelligence. These stocks amplified the performance of bitcoin (CRYPTO:BTC) -- the leading cryptocurrency's price rose by 14% last month.

Business analytics company MicroStrategy (NASDAQ:MSTR), which has converted its long-term investments from bonds into bitcoin, gained 48.9% in January. Colorado-based bitcoin mining specialist Riot Blockchain (NASDAQ:RIOT) saw a 20.8% share price gain. Digital asset manager Marathon Patent Group (NASDAQ:MARA) led the pack with a 98.7% surge.

A green charting arrow on the rise on top of price listings for several popular cryptocurrencies.

Image source: Getty Images.

So what

Bitcoin prices set a new high of $41,000 per token on Jan. 8, providing several shots of adrenaline to all of the stocks listed above.

Marathon magnified these gains by setting up a $200 million shelf registration to finance its recent acquisition of 15,000 new bitcoin mining machines. The company has now bought a total of 103,000 mining computers.

MicroStrategy CEO Michael Saylor raised some eyebrows when he engaged in a public cryptocurrency discussion with Tesla (NASDAQ:TSLA) CEO Elon Musk, suggesting that the electric vehicle maker could make a lot of money by copying his bitcoin investment strategy. MicroStrategy also reported solid fourth-quarter results on Jan. 28, showing investors how its bitcoin tactics have boosted its total asset value by 60% over the past year.

Now what

The rally is still going on. Bitcoin has soared by another 30% since the end of January, carrying these stocks upward with it.

On Monday, Tesla revealed that it had followed Saylor's recommendations and invested $1.5 billion in bitcoin. That's just 8% of Tesla's $19.4 billion cash balance, but the move was still on par with MicroStrategy's bitcoin buys, an all-in strategy involving new debt papers and a total commitment. Bitcoin prices shot 14% higher on the news, landing at $43,400 per token. The cryptocurrency stocks in this article are all on the rise again, led by gains of more than 30% for Marathon and Riot.

These are heady times for cryptocurrency investors as the new category of digital assets gains relevance and support from giants of the traditional finance world. That being said, it's still an extremely volatile market in search of a stable regulatory framework, and the chart could turn downward just as quickly as it rose. I hold a few cryptocurrency tokens myself, but I'm not ready to call them serious investments quite yet.

A judge's gavel resting next to a wooden stand decorated with the bitcoin logo.

Image source: Getty Images.

That's also why I don't own shares of Riot Blockchain, Marathon Patent Group, or MicroStrategy. Their price moves tend to be amplified versions of whatever bitcoin and friends are up to, which sets them up for tremendous downward pressure on bad days, months, or years for the cryptocurrency market. We're playing with fire here, and I would recommend that you keep your crypto-oriented investments relatively small for now. There are other ways to tap into the surging cryptocurrency market with less risk and lower volatility.

This article represents the opinion of the writer(s), who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.