9 min read
This story originally appeared on ValueWalk
While cryptocurrencies have revolutionized the investment markets, they are also incredibly risky. I would know. I recently stated that I had to get out of the Bitcoin (CCC: BTC-USD) sector because it was too much. For those considering virtual currencies, blockchain stocks may be better suited.
First of all, I just don't know where cryptocurrencies will end up as a speculative vehicle. This is one of the reasons I got off before the $ 50,000 goal called earlier. Don't get me wrong – I still believe in the continued rise of Bitcoin and therefore hold a humble position. But I also had to get something out of this ride. Otherwise it would be free.
Second, blockchain stocks represent investments in the underlying technology of Bitcoin and other virtual tokens. While I'm not 100% sure what the future of cryptos will be, I'm far more confident in the belief that the decentralized distributed public ledger system will continue will exist. In addition, the blockchain will trigger additional innovations in the world of fintech.
This moves on to my third point: the innovation that blockchain stocks showcase represents real financial connectivity and integration. For example, bank transfers are slow and expensive. Furthermore, they become problematic when it comes to countries that may not have the most robust economic infrastructure. We need something that is cheap and effective, and only the blockchain has come up with a reasonable proposal.
Furthermore, reducing or eliminating the friction of peer-to-peer transactions will help our own economy cope with the destruction caused by the novel coronavirus. With the possibility of a prolonged recession, the number of people being displaced from the financial system can increase significantly. Hence, only technology will solve this dilemma that these blockchain stocks are benefiting from.
As you can see from the list below, the companies available vary widely, ranging from blue-chip giants to speculative names. Therefore, regardless of your risk tolerance, blockchain stocks offer something for everyone. Let's take a look at:
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 viewed Bitcoin and other cryptocurrencies as competition for the global financial system. Nothing is further from the truth. In reality, blockchain innovation enables blue-chip companies like Visa to offer services that meet the growing demands of their customers.
In the case of the credit card company, management developed the Visa B2B Connect platform, which processes cross-border business-to-business payments from companies in a secure and predictable manner. This is huge for Visa as virtual currencies as a concept are not going to go away anytime soon.
Additionally, Visa stock can benefit from the superiority of blockchain technology. Basically, the platform is more efficient than other alternatives because the component of trust between two parties is not managed by a human (and therefore corrupt) entity, but by an immutable digital record.
If you're not interested in the wild swings in cryptocurrencies themselves, stable blockchain stocks like Visa provide access to a relevant innovation that won't let you down.
When you hear the term blockchain stocks think of the wild swings in cryptocurrency markets. Most likely, something like IBM stocks doesn't immediately fit the profile. As calm as "Big Blue" may be to some investors, it is well worth considering safe exposure to this burgeoning technology.
As you may know, the company set up its IBM Blockchain platform to help businesses and institutions address various challenges that go beyond financial purposes. A great example of this is the introduction of the Covid-19 vaccine. Thanks to the immutable nature of the blockchain, IBM is able to provide end-to-end traceability for the distribution of vaccines in real time.
While I hope we never have to hear about Covid in the future, if we have another health crisis, Big Blue will be ready. That's a good sign for IBM stock.
And as with other blue-chip blockchain stocks, IBM has several other revenue channels in case the decentralized ledger doesn't work. In particular, the solutions for artificial intelligence (AI) and cybersecurity are convincing under the current circumstances.
CME Group (CME)
While the CME Group isn't directly a blockchain stock, it has nonetheless given the entire digital currency complex a massive boost in credibility. You see, as the world's largest financial derivatives exchange, CME gives investors the ability to trade almost anything. With cryptocurrencies as part of its offering, the sector is now legitimate.
Additionally, buying CME shares gives you exposure to Bitcoin trading without having to step into the arena. In a way, owning CME equity is the loose equivalent of selling tickets to the big game rather than betting on one team to beat the other. No, you probably won't get rich in CME, but you probably won't go penniless.
Additionally, the ability to buy Bitcoin futures and trading options contracts gives the underlying asset the constant price movements that enable day trading. Overall, the CME Group's involvement in this area is positive for the digitized economy and should also turn out to be good business for the CME share.
Technically more of a crypto mining game, I still added Nvidia to this list of blockchain holdings, as mining makes most of the decentralized public ledgers tick. Again, the nice thing about this platform is that two parties who don't necessarily trust each other don't have to rely on a third-party intermediary who both may not trust each other. Instead, the intermediary is the blockchain system itself.
However, public blockchains require the participation of nodes (computers) in order to verify transactions that take place within the system. This is where mining comes in, where blockchain users compete for the right to verify such transactions and receive digital tokens as a reward. In order to consistently win this competition, however, intensive hardware is usually required. Nvidia probably offers the best processors for mining tasks, which is very beneficial to the NVDA inventory.
Plus, you don't have to believe in blockchain stocks to appreciate Nvidia. The semiconductor company is exposed to several relevant companies, including video games, machine learning, and autonomous solutions. So you really can't go wrong with NVDA stocks.
Advanced Micro Devices (AMD)
If I want to mention Nvidia on this list of blockchain stocks, I'm bound to include Advanced Micro Devices as well. Granted, this is part of self-preservation. Otherwise, I'd get a lot of warmth from fans of AMD stocks, and I've already had hundreds of emails behind me. I don't need another one to flood my inbox.
Seriously, Advanced Micro deserves more than inclusion as a blockchain / crypto mining game. In the past few years, the company has risen above its larger competitors. Years ago, AMD was an afterthought into the broader field of chip manufacturing. Now it's a legitimate leader in several semiconductor segments, including graphics processing units (GPUs) aimed at mining operations.
You might also be interested to know that AMD stock may be a leading indicator for Bitcoin and major altcoins. It appears that a sizeable rally in AMD stocks preceded robust moves in the cryptocurrency. If so, I don't understand why the two assets may not be mutually beneficial in the future. Higher interest crypto mining is generally good for both Bitcoin's and AMD's GPU revenue.
No, SolarWorld has nothing directly to do with blockchain stocks. And no, I haven't lost my mind. Just listen to me for a second.
While cryptocurrencies may sound like digital fairy dust to skeptics, the truth is that the process of mining these tokens requires real "work". That said, the energy needed to extract most virtual currencies requires a certain amount of sacrifice. Sure, sacrifices don't necessarily give them value. However, it would be wrong to assume that crypto coins are materialized for free.
However, as cryptocurrencies become more popular, the energy demand required to extract many of these coins has become much more intense. And this is where the SRWRF share comes into play. As an investment in solar energy, the underlying product could potentially help make crypto mining more profitable for newbies as it can lower utility costs.
The use of solar energy to generate cryptocurrencies is not a new concept. However, it could become incredibly popular as this market has caught mainstream attention. While SRWRF stocks are a speculative trade, it pays to consider with "stupid" money.
Gone are the days when you could mine Bitcoin on your laptop. As the value and popularity of the original digital token increased, so too did mining difficulties. Now, it can cost thousands or even tens of thousands of dollars to run a Bitcoin mining operation – and even with that amount of money you are not guaranteed to be successful!
Hence, crypto mining farms – or dedicated mining centers – have popped up around the world. Bitfarms is one such mining farm, and conceptually a fascinating one. The BFARF share uses clean and inexpensive hydropower and represents an environmentally conscious way to mine Bitcoin.
The company also operates five mining facilities in Quebec, Canada. Geographically, this appears to be an advantage, as the colder climate should help keep Bitfarms mining equipment from overheating. You would think this will help extend the life of the equipment and potentially turn BFARF stock into a smart speculative idea.
Even so, this is a wild business. So don't get into money that you can't afford to lose.