At the beginning of 2018, when bitcoin prices were still right around $17,000, I laid out a pretty straightforward thesis on blockchain stocks.
The takeaway? Just be patient.
The logic was pretty easy to understand. Blockchain, the decentralized technology underlying bitcoin, has broad and meaningful applications across multiple industries. In the near future, the decentralization principles underpinning blockchain will fundamentally change the way many of those industries operate.
But the value of blockchain stocks was in bubble territory in early 2018. Thus, the appropriate course of action was to wait for the bubble to top. Then, parse out the winners from the losers and invest.
Fast-forward a few months, and the bubble has popped. Bitcoin prices are now at $8,000. The category of blockchain stocks that rose sharply, have now dropped sharply.
Long Blockchain Corp (OTCMKTS:LBCC) is at almost $0.40 and dropping. Overstock.com Inc (NASDAQ:OSTK), which peaked at $90, is at $36 and flat. Riot Blockchain Inc (NASDAQ:RIOT), which peaked at $46, is at $8 and dropping. Meanwhile, Longfin Corp (NASDAQ:LFIN) is nowhere near its $140-plus high.
Does that mean it is finally time to buy blockchain stocks?
Sort of. Since the start of the year, two things have become abundantly clear:
- Blockchain isn’t necessarily the future; decentralization is.
- The stocks most likely to win big in this decentralization shift aren’t any of the aforementioned typical blockchain stocks.
Because of this, I don’t think it’s time to buy blockchain stocks. Rather, it is time to buy decentralization stocks.
Here’s a deeper look.
Decentralization Is the Future
At its core, blockchain is built on decentralization principles and utilizes crowd-sourcing to achieve tasks, as opposed to relying on a central authority or entity. From this perspective, blockchain really isn’t the paradigm shift. The paradigm shift is from centralization to decentralization. And this shift has been happening long before blockchain ever went mainstream.
Just look at Uber or Lyft. Those two companies have successfully disrupted the entire transportation industry by taking power from the few (taxis), giving it to the many (anyone with a car) and creating a system that optimally pairs supply with demand.
Airbnb has done this for property rentals, while Instagram has done this in the modeling/influencer world (think about the class of Instagram models that seemingly overnight became famous).
Meanwhile, YouTube has done this in the non-professional entertainment world (think about all the YouTube stars who make big money with just a camera and a personality).
And Netflix, Inc. (NASDAQ:NFLX) has done this in the professional entertainment world (think about all the original content the company is producing, and how most of that content notably doesn’t feature a Hollywood superstar).
Elsewhere, Shopify Inc (NYSE:SHOP) has done this in the e-commerce world (think about all the start-up internet entrepreneurs who can now sell anything, anywhere).
And last but not least, GrubHub Inc (NYSE:GRUB) has done this in the food world (think about how you can get food delivered to your doorstep from seemingly any restaurant these days).
In other words, decentralization is happening everywhere. And it’s working. Not surprisingly, all of the companies who are capitalizing on decentralization have had winning stocks.
Facebook, Inc. (NASDAQ:FB), owner of Instagram, is up 25% over the past year. Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), owner of YouTube, is up more than 15% over the past year. Meanwhile, SHOP stock is up nearly 60%, NFLX stock is up 110%, and GRUB stock is up 140%.
The Decentralization Stocks to Buy
Because decentralization — not necessarily blockchain — is the future, my buying list doesn’t include the traditional blockchain stocks like LBCC, OSTK, RIOT or LFIN.
Instead, my buying list comprises the technology companies who are leveraging decentralization to change the way the world interacts.
At the top of that list is Facebook, who is going deeper and deeper into blockchain and decentralization to improve their platform (Facebook just launched a blockchain group).
Right below Facebook are Google and Netflix, two companies which are giving creative individuals of all shapes and sizes an outlet to showcase their content.
And right below those mega-tech companies are Shopify and GrubHub, two relatively nascent companies which are built on decentralization principles and are presently experiencing hyper-growth as a result.
Between FB, GOOG, NFLX, SHOP and GRUB, I think investors gain broad exposure to some of tomorrow’s brightest companies.
Bottom Line on Blockchain Stocks
It isn’t time to buy the traditionally over-hyped blockchain stocks like LBCC or OSTK. Rather, it is time to buy into the category of technology stocks who are wisely using decentralization to change the way the world works.
As of this writing, Luke Lango was long FB, GOOG and SHOP.