Although cryptocurrencies have revolutionized the investment markets, they’re also incredibly risky. I would know. Recently, I explained that I had to exit out of the Bitcoin (CCC:BTC-USD) sector because it was too much. However, for those who are considering virtual currencies, you may be better served with blockchain stocks.
First off, I simply don’t know where cryptocurrencies as a speculative vehicle will end up. That’s one of the reasons why I exited before the $50,000 target that I had previously called. Don’t get me wrong — I still believe in the continued rise of Bitcoin, and, therefore, I maintain a modest position. But I also had to get something out of this ride. Otherwise, it’d be for naught.
Second, blockchain stocks represent investments in the underlying technology of Bitcoin and other virtual tokens. While I’m not 100% certain what the future of cryptos hold, I’m much more confident in the belief that the decentralized distributed public ledger system will carry on. Not only that, the blockchain will spark additional innovations in the world of fintech.
This segues into my third point: The innovation underlining blockchain stocks represents true financial connectivity and integration. For instance, bank wire transfers are slow and expensive. Moreover, they become problematic when dealing with countries that may not have the most robust economic infrastructure. We need something that’s cheap and effective, and only the blockchain has forwarded a reasonable proposal.
Beyond that, mitigating or outright eliminating the friction in peer-to-peer transactions will help our own economy manage the destruction caused by the novel coronavirus. With the possibility of an extended recession, the number of individuals being forced out of the financial system may rise substantially. Therefore, only technology will solve this dilemma, which benefits these blockchain stocks to buy.
As you can see from the list below, the available companies are very diverse, ranging from blue-chip giants to speculative names. Therefore, blockchain stocks offer something for everyone, irrespective of your risk tolerance. Let’s take a look:
- Visa (NYSE:V)
- IBM (NYSE:IBM)
- CME Group (NASDAQ:CME)
- Nvidia (NASDAQ:NVDA)
- Advanced Micro Devices (NASDAQ:AMD)
- SolarWorld (OTCMKTS:SRWRF)
- Bitfarms (OTCMKTS:BFARF)
Initially, many corporate and government institutions regarded Bitcoin and other cryptocurrencies as competition for the global financial system. Nothing could be further from the truth. In reality, by utilizing the blockchain innovation, blue-chip companies like Visa can offer services that meet the increasing demands of their clients.
In the credit card company’s case, management developed the Visa B2B Connect platform, which processes corporate cross-border business-to-business payments in a safe, secure and predictable manner. This is huge for Visa, as virtual currencies as a concept will not be going away anytime soon.
Further, Visa stock can benefit from the superiority of the blockchain technology. Basically, the platform is more efficient than other alternatives because the trust component between two parties is not handled by a human (and therefore corruptible) entity but rather, an immutable digital record.
If you’re not interested in the wild swings of the cryptocurrencies themselves, stable blockchain stocks like Visa provide exposure to a relevant innovation that won’t leave you hanging.
When you hear the term blockchain stocks, you can’t help but think about the wild gyrations in the cryptocurrency markets. More than likely, something like IBM stock doesn’t immediately fit the profile. However, as sedate as “Big Blue” may be for some investors, it’s worth considering for safe exposure to this burgeoning technology.
As you may know, the company established its IBM Blockchain platform to help enterprises and institutions deal with various challenges that extend beyond financial purposes. A brilliant example of this is the Covid-19 vaccine rollout. Thanks to the blockchain’s immutable characteristic, IBM is able to deliver real-time end-to-end traceability for vaccine distribution.
While I hope that we never have to hear about Covid-anything in the future, if we do have another health crisis, Big Blue will be ready. That bodes well for IBM stock.
And like other blue-chip blockchain stocks, IBM has several other revenue channels in case the decentralized ledger doesn’t pan out. In particular, its artificial intelligence (AI) and cybersecurity solutions are compelling under the current circumstances.
CME Group (CME)
Though not directly one of the blockchain stocks, CME Group nevertheless gave the entire digital currency complex a massive credibility boost. You see, as the world’s largest financial derivatives exchange, CME offers investors the ability to trade on almost anything. With cryptocurrencies as part of its offerings, the sector is now a legitimate one.
In addition, buying CME stock provides you with exposure to Bitcoin trading without having to step into the arena. In a way, owning equity in CME is the loose equivalent of selling tickets to the big game rather than betting on one team to beat the other. No, you’re probably not going to get rich off CME, but you’re likely not going to be left destitute.
Further, the ability to buy Bitcoin futures and trade options contracts affords the underlying asset the constant price movements that allow day trading to occur. Overall, CME Group’s involvement in the space is positive for the digitalized economy, and it should turn out to be a good deal for CME stock too.
Technically more of a crypto-mining play, I nevertheless included Nvidia in this list of blockchain stocks because mining is what makes most decentralized distributed public ledgers tick. Again, the beauty of this platform is that two parties that don’t necessarily trust each other don’t have to rely on a third-party intermediary that both may not mutually trust. Instead, the intermediary is the blockchain system itself.
However, public blockchains require participation of nodes (computers) to verify transactions that occur within the system. This is where mining comes into the picture, with blockchain users competing for the right to verify such transactions and receive digital tokens as a reward. However, to win this competition consistently usually entails intensive hardware. Arguably, Nvidia provides the best processors for mining tasks, which greatly benefits NVDA stock.
Further, you don’t have to be a big believer in blockchain stocks to appreciate Nvidia. The semiconductor firm has exposure to multiple relevant businesses, including video games, machine learning and autonomous solutions. Thus, you really can’t go wrong with NVDA stock.
Advanced Micro Devices (AMD)
If I’m going to mention Nvidia on this list of blockchain stocks, then I’m obligated to also include Advanced Micro Devices. Admittedly, this is part of self-preservation. Otherwise, I’d get a lot of heat from fans of AMD stock, and I’m already hundreds of emails behind. I don’t need any more to flood my inbox.
Seriously, though, Advanced Micro more than deserves inclusion as a blockchain/crypto-mining play. In recent years, the company has been taking it to its larger rivals. Years ago, AMD was an afterthought in the broader chip-manufacturing space. Now, it’s a legitimate leader in multiple semiconductor segments, including graphics processing units (GPUs) that cater toward mining operations.
Also, you may be interested to know that AMD stock could possibly be a leading indicator for Bitcoin and major altcoins. It appears that a sizable rally in AMD shares precedes robust moves in the cryptocurrency. If that’s true, I don’t see why the two assets can’t be mutually beneficial moving forward — higher interest crypto mining is generally good for both Bitcoin and AMD’s GPU revenues.
No, SolarWorld has nothing directly to do with blockchain stocks. And no, I haven’t lost my mind. Just hear me out for a second.
Although cryptocurrencies to skeptics sound like digital fairy dust, the truth is that the process of mining these tokens require real “work.” That is, the energy needed to extract most virtual currencies require some level of sacrifice. Sure, sacrifice doesn’t necessarily give them value. However, it would be wrong to assume that crypto coins are materialized for nothing.
However, as cryptocurrencies have become more popular, the energy requirements needed to extract many of these coins have become much more intensive. And this is where SRWRF stock comes into the picture. As a solar energy investment, the underlying product could potentially help make crypto mining more profitable for newcomers as it may mitigate utility costs.
Using solar energy to extract cryptocurrencies isn’t a new concept. However, it could become incredibly popular now that this market has attracted mainstream attention. While SRWRF stock is a speculative trade, it’s well worth consideration with “dumb” money.
Gone are the days when you can mine Bitcoin on your laptop. As the original digital token increased in value and popularity, so too did its mining difficulty. Now, it can cost thousands, even tens of thousands of dollars to run a Bitcoin mining operation — and you’re not even guaranteed to be successful with such a cash outlay!
Therefore, crypto-mining farms — or dedicated mining centers — have popped up across the world. Bitfarms is one such mining farm, and, conceptually, it’s an intriguing one. Utilizing clean and competitively priced hydroelectricity, BFARF stock represents an environmentally responsible way to mine Bitcoin.
As well, the company operates five mining facilities in Quebec, Canada. Geographically, this would seem to be an advantage as the colder climate should help prevent Bitfarms’ mining equipment from overheating. You’d think that this will help extend the life of the equipment, possibly making BFARF stock a shrewd speculative idea.
Nevertheless, this is a wild one, so don’t get involved with money you can’t afford to lose.
On the date of publication, Josh Enomoto held a long position in BTC.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.