It’s hard to avoid the buzz surrounding Bitcoin and other cryptocurrencies. Many Fools, including myself, have recommended avoiding the crypto craze, as they were speculative bubbles that’d eventually come to an end. At the time of writing, Bitcoin has fallen below the US$10,000 level and is likely heading lower in the weeks ahead as Canadian regulators ponder whether they should place a ban on cryptocurrencies in order to protect speculators from themselves. Although Bitcoin and the cryptocurrency mania is much like the tech bubble of the late 90s, the underlying technology, blockchain, is real, with the potential to completely change the tech landscape.
Many Canadians have been wondering whether there’s a way to invest in blockchain and cryptocurrencies without having to purchase actual coins, many of which may not be around in a few years. The tax implications of Bitcoin trading and the like have reportedly been nasty.
Enter HIVE Blockchain Technologies Ltd. (TSXV:HIVE), a Vancouver-based cryptocurrency miner that used to be a miner of physical gold. The company is one of the first publicly listed securities that provide investors exposure to blockchain infrastructure and cryptocurrency mining without needing to dip a toe into the actual cryptocurrencies themselves.
The company has partnered with Genesis Mining Ltd., a cryptocurrency mining hashrate provider, and Fiore Group, a merchant banking firm, in order to accelerate its crypto mining operations at the lowest cost possible. HIVE has mining facilities located in Iceland and Sweden, both of which offer HIVE the ability to drive down the cost of crypto mining because of lower cost power.
In terms of crypto mining firms, HIVE is definitely a stand-out player; however, the volatility involved with the cryptocurrency it mines (Bitcoin, Ethereum, etc.) will drastically impact a given quarter regardless of the operational improvements. Given that cryptocurrencies are trending down and are still in bubble territory, it’s very likely that HIVE will stand to get punished as we head into the latter part of 2018.
A bet on HIVE is a bet on all cryptocurrencies. If you’re like me and you believe that Bitcoin and Ethereum will lose a majority of their value in time, HIVE is an intriguing instrument that you can short in order to place a bet against a broad basket of popular cryptocurrencies, all of which will likely continue on their sharp negative trajectories. Sure, HIVE could sell its coins immediately to reinvest in infrastructure; however, the discount future cash flows or “coin flows” are extremely unattractive if you’re realistic about the true value of cryptocurrencies.
HIVE is a great company with a first mover advantage; however, it ultimately won’t matter, as they’re mining extremely volatile and likely rapidly depreciating assets. Unlike an investment in cryptocurrencies themselves, however, HIVE does have salvage value through its underlying computational assets, so even if cryptocurrencies all died out, management may be able to adapt and put its computational power to better use in another way.
HIVE is by no means a safe way to bet on either crypto or blockchain. As cryptocurrencies continue to fall, so, too, will shares of HIVE. If you’re a Canadian crypto bear, it may make sense to short HIVE today, but be careful: any rebound could see cryptocurrencies send HIVE back in the green.
Stay hungry. Stay Foolish.