That would be an eye-watering gain for a stock over the course of a year.
But our Crisis Investing readers had the chance to earn that return on a stock in just four months.
Even more mind-blowing… another recommendation from Crisis Investing editor Nick Giambruno is up 561%… in a single month.
Another is up 254% in two months.
The lowest performer is up “only” 31% since Nick recommended it at the start of January.
These gains are all plays on what Nick calls “Bitcoin Supremacy” – bitcoin’s potential emergence as the world’s dominant form of money.
But they’re not from a direct investment in bitcoin… or any other crypto asset you need to buy on an exchange and store in a digital wallet.
Instead, they’re from stocks you can buy through your regular broker.
As I (Chris Lowe) will show you today, these crypto stocks are on fire right now. And they’re set up to supercharge the gains on bitcoin and other cryptos.
I’ve been working in the newsletter business since 2007. Before that, I was an analyst for Bloomberg competitor Reuters.
And it’s extremely rare to see the kind of gains Nick’s readers have been racking up on crypto stocks.
A good comparison is Tesla (TSLA), which is arguably the world’s hottest stock right now… at least if you’re tuning in to the mainstream media.
Its shares shot up 743% last year. TV’s talking heads can’t stop raving about it. Tesla is one of the most popular topics on Twitter. It’s also all over Bloomberg and The Wall Street Journal.
But Nick’s top-performing crypto stock did that in just one month.
If you’re looking for a new asymmetric speculation – one with limited downside and massive upside potential – put crypto stocks at the top of your list.
I’ll show you how they can boost the returns you earn on regular cryptos in a moment.
First, I want to make sure everyone is up to speed on the basics.
As I covered in more detail here, blockchain is the technology that makes cryptocurrencies possible.
It’s just a fancy word for an unhackable decentralized digital ledger.
Blockchains can run currency networks – such as bitcoin – in a way that cuts out middlemen.
Think of this kind of blockchain as a secure global log of currency transactions.
Blockchains also allow you to create decentralized versions of Twitter… run secure elections… and form smart contracts to buy and sell everything from houses to fine art.
Blockchain miners provide the computing power these blockchains need to run. In return, they earn crypto.
If they’re providing their services to the Bitcoin blockchain, they get paid in bitcoin. If it’s the Ethereum blockchain, they get paid in ether (ETH)… And so on.
Take bitcoin mining, for example.
As of this writing, miners earn roughly 7 bitcoin per “block” – or group – of bitcoin transactions. And a new block gets added to the blockchain every 10 minutes.
At today’s bitcoin price of $31,430, that works out to $221,960 worth of bitcoin up for grabs every 10 minutes… or nearly $32 million worth of bitcoin every day.
That’s not pure profit. Miners have to assemble vast amounts of computing power to have a chance to earn these rewards.
This computing power requires a lot of energy – not only to run the processors… but also to run the fans and AC units to cool them down.
All told, mining on the bitcoin network uses about 78 terawatt hours of electricity a year.
That’s equal to the annual energy consumption of several million U.S. homes… or roughly the annual energy consumption of Chile.
But mining is still a profitable business… especially if you can keep your energy costs down.
A Norwegian bitcoin miner Forbes magazine quoted last year said the cost to mine one bitcoin was just over $8,200. At today’s bitcoin price… that works out to a 74% profit margin.
With the prices of bitcoin and other cryptos skyrocketing, those margins are getting fatter. And more revenue is falling to the bottom line.
Here’s how Nick explained it to our Crisis Investing subscribers (if you’re one of them, you can catch up in full here) last September…
Bitcoin mining is a cutthroat business, but the profits can be huge for those who get it right. That is especially true when the bitcoin price is rising, which I expect it to in the months ahead.
Think of investing in a bitcoin miner like a leveraged play on bitcoin. Even a small change in the bitcoin price can have an enormous impact on the profits of a miner.
It’s similar to how junior mining stocks offer leveraged exposure to gold and silver… but potentially even more lucrative.
Let me emphasize, I am only interested in bitcoin miners. Bitcoin miners produce bitcoin, which is the hardest money known to man. It might not even be fair to bitcoin to call it digital gold. It’s potentially something even better. Other crypto miners, on the other hand, produce the digital equivalent of Chuck E. Cheese arcade tokens, which I am not interested in.
Regular readers will be familiar with the same concept with gold and gold mining stocks, as Nick referenced.
For every 1% move in the price of gold, gold mining stocks tend to move more than 1%.
As the gold in the ground they own rises in price, their revenues go through the roof. But their costs remain the same. Profits explode.
The same is true of crypto miners. As crypto prices rise, so do their revenues. But miners aren’t spending more on energy or computing power.
So their profits shoot up even higher.
Let’s say ACME Mining Corporation mines bitcoin at a cost of $10,000 a coin.
With bitcoin trading at $31,000 a coin, ACME books a profit of $21,000 a coin.
But if the price of bitcoin climbs to $50,000, the costs stay the same. And the company’s profit per coin jumps to $40,000.
That’s a 90% jump in profits – even though the bitcoin price went up only 61%.
This is what makes crypto miners excellent speculations during a crypto bull market like the one we’re living through today.
But if you’re looking for a quick way to get broad exposure to these miners, an exchange-traded fund (ETF) is a second-best option.
Now, it can take a lot of legwork and screening (filtering) to find the ETFs with exposure to bitcoin mining.
But our goal at the Cut is to make your life easier, not harder… so we’ve done the work for you.
There are three ETFs that are closely linked to blockchain mining… and none of them are pure plays.
The first two are the Blockchain Technologies ETF (HBLK) and the Horizons Big Data & Hardware ETF (HBGD).
They focus on miners and other companies in the blockchain tech sector. But they’re still tiny. Each manages less than $20 million in assets.
The third is the Amplify Transformational Data Sharing ETF (BLOK).
It has $500 million under management. So it’s bigger than the other two. And it gives you exposure to the bitcoin miners.
Just be aware that it also owns blockchain-related companies that aren’t directly involved in mining.
I’ll have more for you in future dispatches if Nick’s recommendations come back into buy range.
Regards,
Chris Lowe
January 21, 2021
Bray, Ireland