Often attributed (though no one knows for sure) to Joseph Kennedy, a nevertheless oft-cited quote states, “If shoeshine boys are giving stock tips, then it’s time to get out of the market.” I don’t want to speak out of turn, but I’m having similar reservations about Sphere 3D (NASDAQ:ANY). Suddenly, it seems everyone is eyeballing the cryptocurrency market, potentially leaving ANY stock in a precarious position.
On the investor relations section of its website, Sphere 3D bills itself as a provider of containerization, virtualization and data management solutions via hybrid cloud, cloud and on-premise implementation services. Further, the company claims a portfolio of strong brands which together are dedicated to “helping customers achieve their IT goals.” But that’s not quite what has triggered a boom in the ANY stock price.
Instead, as our own Chris MacDonald mentioned, the meme-trading crowd got heavily involved with the short-squeeze argument. Moreover, the upcoming merger between Sphere3D and Gryphon Digital Mining — a Bitcoin (CCC:BTC-USD) miner with an emphasis on utilizing renewable off-grid energy sources — sparked much attention for ANY stock, because of course it did.
With institutional investors showing decisive interest in Bitcoin and other major cryptocurrencies, it seems like the right time to get involved — you know, the fear of missing out and all that jazz. Further, Federal Reserve Chair Jerome Powell recently confirmed that the U.S. has no plans to ban Bitcoin and the broader virtual currency complex.
Naturally, the price of BTC skyrocketed as a result. ANY stock has also crept up slightly in the past few days.
And that could very well be the case. However, it might also get a reality check.
Too Much of a Good Thing for ANY Stock
I mention the possible Joseph Kennedy line because it’s a truism that applies to almost any scenario where too much hype or anticipation regarding a certain event has a strange tendency of ending in disappointment.
For instance, after a generation’s gap between the end of the original Star Wars trilogy and a new series, many fans flocked to the box office to watch The Phantom Menace. After such a long wait, surely, George Lucas and company will deliver the goods.
Well, the fans weren’t happy, let’s put it that way. Sometimes, that special flicker is there but for that moment and recreating the magic rarely ends well. Unfortunately, I see a similar circumstance surrounding ANY stock.
Under the obvious framework, combining forces with a crypto miner makes sense due to immediacy bias. With Bitcoin seemingly again on the verge of breaking into $50,000 territory and beyond, ANY stock would benefit from the mining exposure. But what happens if the “obvious” catalyst doesn’t pan out?
At least a possibility exists that those who are betting everything on the rise of crypto will be bitterly disappointed — and that would include stocks that are tied to the sector. According to a Yahoo Finance article, a bankruptcy case involving Mt. Gox — formerly the world’s largest Bitcoin exchange — will conclude this month.
The report goes onto to state that the “resolution of the Mt. Gox bitcoin exchange insolvency case could create a multitude of new bitcoin millionaires.” On tap are 200,000 BTC that have been recovered, with 36,800 creditors owning payout claims.
Now, let’s consider the psychology here. After almost a decade of financial purgatory, many of these creditors will probably want to cash out as soon as possible. You know, get something while it’s there. I know I would.
A Perfect Setup
Obviously, with the wild and unpredictable nature of cryptocurrencies, I could absolutely be dead wrong about ANY stock. Perhaps Bitcoin goes on to hit six figures and therefore take Sphere 3D to the moon.
But I also can’t help but think in the back of my mind that this is a perfect setup. Like the proverbial shoeshine boy, seemingly everyone is hyped up about Bitcoin, egging it on to reach even more ridiculous plateaus.
However, because we have such a dilutive event — that is, tons of Bitcoin that many Mt. Gox creditors will be eager to dump — I’m genuinely concerned that we’ll have a Phantom Menace situation on our hands. So, don’t get too comfortable with the speculative bet on ANY stock.
On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.