In my previous post I laid out my personal thoughts on the cryopto currency market and what we can expect for the year ahead, including some extreme volatility. Less than a month into 2018 and volatility is already rearing it's head, as we saw a significant downturn in pricing last week, seeing many coins lose 40,50,60+ percent. Most of them quickly bounced back and are now stabilizing again, for hopefully another push upwards; although that remains to be seen. Regardless of which direction the immediate future takes us, I believe these types of swings will continue to present themselves throughout the year ahead.
I've allocated a certain amount of funds to invest in this industry and have broken it down into three categories:
- blockchain stocks that trade on the stock market
- crypto currency coins purchased on the open market via crypto exchanges
- mining rigs for producing coins and supporting the blockchain infrastructure.
Blockchain Stocks
It's no surprise that companies are coming out of the woodwork release press statements attaching themselves to cryptocurrenies and blockchain in general. I'd offer words of caution when reading these announcements, as many of them tend to be a lot of smoke and mirrors, discussing the huge potential of blockchain tech, but fail to provide significant information about how their company is using it as a revenue generator. Just because a company implements or gets involved with blockchain tech, doesn't mean their revenue is going to skyrocket. Do your own due diligence.
Similar to the .com boom and bust, many companies announcing internet associations took off simply because of the hype and band wagon investors. Companies like Pet.com went to ridiculous highs, and then rode the rollercoaster right back down. At the end of the day, we want to be left holding the 'Googles' of the industry, not the 'pet.coms'.
In terms of publicaly traded companies, I've identified only one, that I believe to be tried, tested and true within the crypto/blockchain industry, and that is HIVE Blockchain Technologies. HIVE sets up and manages crypto mining farms at strategic locations around the world, including Iceland and Sweden, where cooler temperatures are ideal for mining as well as energy costs are low. Furthermore, Hive has several facilities up and running, and as such has established a track record and a roadmap for an expandable business model. What further strengthens HIVEs long term model, is the back-end proprietary technology they've developed for managing a crypto mining farm. Without going into too much detail, this is a huge stumbling block for new companies expecting to launch a competing business. HIVEs backend software manages equipment, monitors performance, temperature levels, equipment technicalities and more.
One of HIVEs biggest partners (and investors) is Genesis Mining, the worlds largest crypto hashpower producer. Genesis is working along side HIVE in the growth and development of more facilities and in advancing the mining technology. Here's an interesting video introduction to the Genesis and HIVE solution:
I believe HIVE has a solid foundation and has already worked through the growing pains involved with the expansion of large scale tech companies. I love their structure as well as the future potential. As their farms continue to open and expand, we'll start to see the related revenues included in financial quarterly reports.
Crypto Currency Coins
I've spent a lot of time reviewing dozens of coins along with their technology, infrastructure, management team, partnerships etc. Admitedly, it's an overwhelming amount of information to review, and it's tough to stay on top of it all as there are so many new coins hitting the market on a daily basis. As I mentioned above, my goal in review coins is not just to find a coin with a clever application, but to find the ones that will be the foundation of the future of blockchain technology. In my (amateur) opinion, I strongly believe Ethereum is the most sound technologically and offers the largest potential to emerge as the industry leader.
From the research I've done, if I had to select one coin to back, it would be Ethereum. They are proving to be the foundation of the industry. With the use of their technology and 'smart contracts' Ethereum can be implemented into many transaction based industries, including the recent announcement from the Canadian Government to conduct a trial project based around the implementation of the Ethereum platform. Many of the new crypto coins hitting the market are actually based on the Ethereum network, meaning their transactions on the back end go through the Ethereum blockchain. It is these types of scenarios that makes me believe that Ethereum is currently and will continue to be a trend setter in the industry; providing the blockchain building blocks for companies to use.
All that said, there are many other crypto currencies worth reviewing and evaluating. Too many for me to get into in this post, but some to consider are: Ripple - Stellar - IOTA - Bitcoin - NEO - STEEM - DASH - Monero - EOS - Bitshares
Mining Rigs
Rigs are the lifeblood of the blockchain technology. Not only do rigs generate crypto currency for their efforts, but they are responsible for processing all transactions put there all cryto networks. I believe this to be one of the most commonly misunderstood pieces of the industry. Rigs earn their income by processing transaction. Every transaction processed through a network has an associated transaction fee attached. By solving these equations, that is how rigs are rewarded. Without rigs, the blockchain doesn't exist.
As such, with this type of investment, you're not strictly tied the price of coins. Regardless of the raise and fall of currency pricing, your rig will continue to produce coins. So, if you believe in the longevity of the industry, this is (in my opinion) the best option.
There are several methods for mining various coins, which I'm not going to get into in this post. As I mentioned above, my primary interest is the Ethereum network and as such I'm most interested in supporting that platform. This will change however in the coming months as Ethereum changes away from Proof of Work over to a Proof of Stake algorithm. When this happens, I'll have to look at an alternative coin to mine.
If you don't want to have a rig in your own house, you can alternatively look at cloud based mining, where you can lease mining equipment from large scale operations such as Genesis Mining. As always, my recommendation is to do your own due diligence, as there are many companies popping up claiming to operate mining farms, with little proof of their operations. At this time, Genesis Mining is the only one I'm prepared to recommend.
Conclusion
So this in a nutshell is my approach to the crypto industry for the year ahead, including a combination of my own mining rigs as well as investments into blockchain industry leaders on the stock market (HIVE) and the accumulation of various coins. As I've mentioned, always do your own due diligence when determining what opportunities are best for you. This is an extremely volatile industry, and you've got to be prepared to ride the rollercoaster both up and down.
Post settings Labels Published on 1/23/18, 8:31 AM Pacific Daylight Time Permalink Location Options
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