The Many Ways to Invest in Blockchain Technology (Besides Buying Bitcoin in 2018)
Blockchain technology has been all the craze for the past year even though it was developed in 2009. Even with the astronomical returns bitcoin (BTC) has provided in 2017 many individuals and institutions are still hesitant to get involved in the cryptocurrency markets. Buying BTC and other alternative currencies are the easiest way to invest in the blockchain. However, for those trying to avoid investing in cryptocurrencies, what is the next best approach to supporting and being invested in the blockchain?
The State of the Market
2017 was one to remember for the cryptocurrency markets and blockchain technology. However, many investors believe 2018 will be exponentially more significant for blockchain adoption and market growth. Bitcoin saw almost a 2,000 percent climb in 2017 followed by a correction of nearly 70 percent. The price volatility is precisely what scares off many weak handed investors even though the returns are on par with the corrections.
The prior generation of investors who grew up with the stock market and the Goldman Sachs era (when Enron was still around) have an issue with what cryptocurrencies represent. It may be because they will decentralize liquidity from central banks and provide banking to the masses, or it may because they see the technology infringing upon their jobs. ICOs have almost entirely replaced IPOs which were the bread and butter of many investment banking firms. Resulting in most long-term “old school” investors being hesitant about entering crypto markets.
Many feel digital currencies are philosophically flawed as they are not tangible. The question is, is there worth to something you can’t feel, touch, hold? Of course! The problem is attempting to come up with a valuation which can prove a difficult task for analysts that have spent their whole lives focused on stocks and bonds.
Bitcoin versus the Blockchain
They are not the same thing. Bitcoin incorporated the blockchain and was the first cryptocurrency to do so. However, they are not synonymous. Blockchain technology is the underlying digital record system that Bitcoin and other altcoins use. The blockchain powers the majority of cryptocurrencies in some form or another. Some blockchains have transparency included while others allow individuals to send funds privately. The benefits of the blockchain go far beyond being able to transfer funds seamlessly. The blockchain can benefit supply chain management (and already is) along with greatly benefiting the financial sector by eliminating many fees that currently plague it.
Bitcoin is not the same thing as the blockchain, although BTC does incorporate the blockchain as its platform. You can be a blockchain supporter while still not loving the concept of BTC. If you love the concept of cryptocurrencies, as the King does. It is recommended you invest in cryptocurrencies you support the teams and philosophies behind. These may include major coins like Bitcoin and Litecoin or some of the smaller ones like Stratis. If the cryptocurrency markets seem foreign and unfamiliar, there are always alternatives to directly investing in them. Blockchain opportunities for investment are abundant even if you do not wish to enter the cryptocurrency markets (which the King recommends you do!).
Overstock.com is an online retailer that started by selling surplus (“overstock”) of major retailer’s inventory. What the majority of individuals do not know is that Overstock has transitioned from selling surplus clothing to also being a surprising blockchain play.
The Chief Executive Officer (CEO), Patrick Byrne is attempting to accomplish a major advancement with the creation of tZero. The goal is to create an SEC-regulated alternative trading system becoming a blockchain based global property registry that becomes a universal means of accepting collateral by lenders. By purchasing Overstock stock or options, the investor is provided solid exposure to the blockchain sector without having to own physical cryptocurrency.
Having an SEC-regulated alternative trading system is an incredible idea. Currently, SEC regulations apply to minimal exchanges, and with time the regulatory stance will catch up to the technology. When this happens the legitimate companies, like Overstock.com, will yield enormous returns for having conservatively entered the blockchain arena. Marc Cohodes who is a well-known short seller expects Overstock to be valued between $200-$400 upon the successful completion and implementation of tZero. If his predictions are correct on the low end, the returns will amount to more than 400 percent.
With major U.S. institutions banning the purchase of cryptocurrencies. with credit cards, it seemed that Visa and MasterCard were not in favor of crypto. However, it looks like this was not the case but more so the banks trying to protect consumers from wild fluctuations and not being able to pay their credit card bills.
American Express and MoneyGram made public partnerships with Ripple (XRP) to aid in the transfer of funds across borders seamlessly. It would be surprising not to see MasterCard or Visa embarking on a similar partnership or creating their own cryptocurrency.
MasterCard happens to be very interested in cryptocurrency, and the blockchain as one of their primary business models is facilitating payments across international borders. Currently, there is processing times and elaborate fees associated with such transactions.The analysis demonstrates that MasterCard and blockchain technology would work great in tandem. The reality is blockchain currently is a better way of sending money for goods and services than MasterCard’s current alternatives. Due to the significant benefits associated with the blockchain, MasterCard has been focused on the blockchain quietly for some time now.
In October, MasterCard began to facilitate payments through blockchain-based technologies even though bitcoin and other major cryptocurrencies were not part of their ecosystem.
MasterCard is publicly proceeding very cautiously with their blockchain technology, eagerly waiting to see how many countries handle the regulation of cryptocurrencies. Their secretive nature about their blockchain programs can only hide so much. If you look up patents, MasterCard holds the second total number of patents related to blockchain technologies. Their most recent blockchain patent request was one that facilitated instant blockchain payment processing. If they were able to get such a patent they would be able to offer consumers blockchain-based credit and debit card.
Although acting stealthily, MasterCard is heavily invested in blockchain technology and it should reap huge rewards in the short and long term.
International Business Machines: IBM
Did you know “IBM,” the computer company, stands for International Business Machines (IBM)? IBM may be one of the few stocks that have been relatively stagnant for years almost entirely missing out in the advent of cloud computing. IBM was faltering for many years because they relied for too long on their outdated hardware and software business. However, IBM is a massive corporation, and they were able to find top talent among their developers to quietly solidify themselves as a top blockchain company.
A recent report from Juniper Research stated IBM was the most reliable name in the nascent blockchain business. Many startups are trying to make a name for themselves by releasing coins/tokens, IBM has already solidified themselves as a top technology company for many years. Their entrance into the blockchain sector should come as no surprise, but as the general population begins to realize how involved they are the value of IBM shares should rise significantly.
Regulators and government agencies will not trust cryptocurrencies that have been around for a short period over a massive powerhouse like IBM. When major organizations and governments choose to enter the world of the blockchain, they cannot afford mistakes. IBM has already launched a small blockchain platform showing promise. UBS was recently quoted as saying by IBM introducing the blockchain for its global financing unit that it, “has reduced dispute resolution time from 50 to fewer than ten days and reduced administrative costs.” The benefits are clear, the blockchain technology many were skeptical about will penetrate all aspects of society and business.
IBM also is specializing in supply chain management blockchain technology. Although blockchain technology is an already saturated part of the market, there are no major players like IBM. Their blockchain technology for the supply chain allows for more efficient tracking of shipments, improving food safety, better security, and transparency when necessary. IBM can do endless possibilities with blockchain technology. Having been behind on the last major technological advances in computing, the King fully expects them not to miss another major opportunity. The Blockchain is a major opportunity of 2018, and there should be more and more publicity regarding its adoption and use within leading organizations.
Eastman Kodak: KODK
Well, this is a name that has only recently become part of our conversation again. The reason, because they intend to release their own cryptocurrency. Eastman Kodak (Kodak) was a household name for many years being the top producer of camera film. Camera film is almost entirely obsolete at this point with Kodak having suffered years of losses because of their inability to adapt. The advent of blockchain technology may provide the catalyst Kodak needs to become a household name again.
The KodakCoin was Kodak’s attempt to break into the blockchain and cryptocurrency sector. Most people’s initial response was that Kodak was solely trying to take advantage of the current crypto and blockchain hype with little substance behind it. Kodak claims they aim is to cultivate a digital currency that facilitates payments for photographers’ images but also using the blockchain to ensure those photographs are not being used without the owner’s permission. This dual approach of sending payments, basically royalties, while providing the security that a photographer’s photo will not be used without their permission. KodakCoin may be able to provide the cryptocurrency world with a valuable coin that has not been created yet. Kodak will initially have to build a very well educated development team to even begin the process of the creation of their digital currency.
Kodak’s CEO Jeff Clarke stated, “For many in the tech industry, blockchain and cryptocurrency are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it is used, these buzzwords are the keys to solving what felt like an unsolvable problem. Kodak has always sought to democratize photography and make licensing fair to artists. These technologies give the photography community an innovative way to do just that.” It seems he may be capitalizing on the cryptocurrency boom as their stock responded with a significant rebound following the announcement of KodakCoin. However, even if Kodak is trying to capitalize on the market, they should be. If they can to pull off a project close to what they are claiming the value of Kodak will appreciate substantially as will the KodakCoin.
Projections place the digital photography market at $100 billion or more per year by 2021. However, with photographers able to wield little control over the use of their photos it is still basically the Wild Wild West. Collecting payments and ensuring they are not used without the photographer’s consent are the two biggest issues facing photographers and KodakCoin may be a great solution to both problems. Anticipate Kodak to have a strong 2018 if they can manage to pull off the blockchain based photography payment and security system.
The King wrote an article regarding NVDA and how bullish their CEO is on February 14.
NVDA produces ASICs and GPUs, which are high-tech computer parts. The more powerful the GPUs and more advanced the ASICs the better results they produce. What this to translates to is one thing in the crypto world; faster cryptocurrency mining. NVDA can contribute much of their recent success to their booming ASIC and GPU sales for the last two years. However, the CEO will be very quick to tell you that their self-driving car technologies, artificial intelligence, and augmented reality departments are all equally if not more important than their ASIC and GPU production. Additionally, as the value of cryptocurrencies continues to climb the number of individuals mining them continues to grow as well.
NVDA has capitalized on the sales of their computer chips and graphics cards to crypto enthusiasts for years. The reason for their dramatic increase in sales is because these computer chips and graphics cards are perfectly suited to perform the unique computations required in cryptocurrency mining. The Normal computer processors used to be able to mine for BTC for a profit in the early years of BTC (2009-2013). However, as more BTCs were mined the difficulty of mining increased as well. The increase in mining difficulty requires computers with stronger processors to mine them efficiently and profitably. The Graphic processors and advanced computer chips make mining for more effective making NVDA go from $20 a year ago to over $200 today.
NVDA should remain a strong play while coins are continued to be mined at an enormous rate. Headlines regularly read how mining electricity consumption is building at an alarming rate. This alarming rate may be bad for the environment, which should be a concern to us all, but for companies that provide the hardware for data centers and mining facilities, this news is wonderful. NVDA shouldn’t see a slowdown in 2018 as crypto is continued to be adopted and more and more mining based cryptocurrencies are released.
Cryptocurrencies have been around since 2009 but it has taken a much longer period for publicly traded companies to believe in the blockchain. It has taken even longer for Exchange Traded Funds (ETF) to get involved in the sector. Reality Shares NexGen Economy ETF (BLCN) provides exposure to the blockchain for investors in the form of an ETF. The ETF was just recently launched to provide exposure to companies focused on blockchain development. For the general exposure, this ETF and similar ones are a great concept.
BLCN immediately after launch accumulated large amounts of Overstock, IBM, Intel, Cisco Systems. The structure and plan of IBM and Overstock’s blockchain systems have already been discussed which makes them a clear play for an ETF looking to acquire stocks for blockchain exposure. Their focus is not cryptocurrencies, but companies that will benefit from the advent of the blockchain and the reality that it is the preferred method of digitally doing business. As more companies implement the blockchain ETFs associated with blockchain technology should see significant growth in value.
Originally the word “blockchain” was going to be in the title of their ETF, but the Security and Exchange Commission (SEC) reached out to them and asked them to remove the word. There are significant mania and craze surrounding blockchain technology and this hype the SEC is trying to keep to a minimum. Eric Ervin is the CEO of BLCN and he firmly believes blockchain is still in its infancy, effusively displaying confidence it will have far-reaching and disruptive effects in nearly every industry. The King completely agrees with this as we have already witnessed significant market penetration in the supply chain management sector.
BLCN is capitalizing on the crypto craze by providing an outlet for investors in the normal financial markets to purchase an ETF providing them exposure. This broad exposure is the safest and easiest to stomach for new investors in cryptocurrencies and the blockchain technology.
Amplify Transformational Data Sharing ETF: BLOK
Reality Shares’ ETF and Amplify Transformational Data Sharing (BLOK) launched at approximately the same time. Similarly, in reality, BLOK was not allowed to use the word blockchain in its name. The SEC is trying to enable blockchain investments without feeding into the hype. What they are doing is very healthy in controlling the mania but is somewhat comparable to Harry Potter and the word “Voldemort.” It is almost as if the word “blockchain” cannot be spoken in financial sectors due to the association with speculation. The SEC is feeding into this avoidance of the use of the name but the major positive is they are providing outlets for investors to enter the blockchain world. Regulation will always be better than an outright ban, even if it involves avoiding using the word “blockchain.”
BLOK also has substantial holdings in many of Reality’s holdings. Overstock is a favorite of both ETFs. With BLOK also focusing on other chip processors like Taiwan Semiconductor (TSM), and Square (SQ). BLOK is unique compared to Amplify’s other ETF’s as it is intended to be actively managed and traded. They are calling BLOK a completely new breed of ETFs when compared to what Amplify was offering previously. Amplify’s CEO, Christian Magoon made a poignant statement, “Our key differentiator is that we believe you have to be active when you engage in this space. To capture the upside and manage downside risk, you have to be, on a daily basis, looking at this and adjusting your portfolio.” He hit the nail on the head with this comment. The crypto space moves much faster than regular financial markets with corrections taking just months to occur, whereas, in financial markets, a similar correction could take years.
BLOK understands the importance of actively managing a portfolio of blockchain related assets. Ultimately, this is key to success while operating in the cryptocurrency and blockchain space. BLOK should be a very strong buy and hold through 2018 as it should easily outpace the standard S&P return.
Grayscale Bitcoin Investment Trust: GBTC
Specific stocks that are capitalizing on blockchain technology have already been discussed. ETFs have also been mentioned with many of their assets highlighted. One of the final tools left for investors is investment trusts. Grayscale Bitcoin Investment Trust (GBTC) is as close to investing in bitcoin as you can get without directly buying the cryptocurrency. Everyday brokerage accounts do not provide access to BTC, but you can purchase GBTC. The majority of those in media speak of GBTC being an ETF.
However, this is not accurate as GBTC is not traded on any major exchange. Making it impossible to be an “exchange” traded fund. The functions of GBTC are almost identical to an ETF. Every share of GBTC represents 0.0919 BTC which means the trust is just as volatile as BTC. GBTC provides exposure to BTC for the average investor not looking to make a cryptocurrency exchange account. The biggest issue is as GBTC is one of the few ways for investors to buy BTC without actually buying BTC, it trades at a premium to the price of BTC. When corrections happen they happen on an even greater level for an asset trading at a premium to BTC.
GBTC is the laziest way to invest in BTC the King has come across in a while. If you want exposure to a specific stock, purchase it. If you want exposure to blockchain technology in general pick an ETF. However, it seems illogical to buy GBTC at a premium over the price of BTC when you can easily make an exchange account today and buy the BTC yourself.
Conclusion: Blockchain Opportunities Are Plentiful
Blockchain technology is revolutionary and the biggest companies in the world have already noticed and are implanting their own forms of the blockchain, or releasing their own cryptocurrencies. For investors that did not want to buy directly into the cryptocurrency markets due to the lack of regulation, now there are a significant number of great opportunities to choose between. Volatility plagues the crypto space which is why 600 percent gains are commonplace but so are 50 percent corrections. To avoid this level of volatility, there are now many ETFs and individual stocks that will benefit with the adoption of the blockchain without having the same level of volatility exposure as owning actual cryptocurrencies.
This is a risk-reward analysis for every investor. The highest risk, highest reward investments are the actual cryptocurrency markets and exchanges. However, with high reward comes high risk and many prefer safer investments that do not require constant attention. The top blockchain companies and ETFs provide this lower level of risk while still providing the exposure so many investors crave during this time of blockchain implementation.
The King personally recommends investors stay completely diversified owning both cryptos and regular assets from stocks to real-estate. However, being the CryptoKing, he is heavily invested in cryptocurrencies and believes they will yield returns far greater than the majority of “normal” markets in 2018. Bitcoin is the “safest” of the cryptocurrencies and should provide significant returns from its current price under $10,000.