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Bitcoin May Be Down, but These Cryptocurrency Miner Stocks Are Soaring Today
Stocks couldn't go up with bitcoin over the weekend, so they're going up today. But are mining stocks the best way to bet on the rising price of bitcoin?
Jon Quast (TMFJaguar)
Dec 21, 2020 at 8:23PM
What happened
The bitcoin rally has faded for now. According to CoinDesk, bitcoin hit an all-time high of $24,273 on Sunday, but it's pulled back about 6% as of this writing. But even though bitcoin is down today, stocks for bitcoin miners are up. Consider how these stocks ended the day:
Now what
Investing legend Warren Buffett once said, "A horse that can count to ten is a remarkable horse -- not a remarkable mathematician." He meant that a company can be a standout when compared to others in its industry, but that doesn't necessarily make it a great business or investment opportunity. I personally think this applies to cryptocurrency miners.
Don't get me wrong, I like some cryptocurrencies, and I even bought bitcoin and Ether. I see it as a simple case of supply and demand. Specifically, the supply of bitcoin is limited -- and recently we've seen a surge in demand from corporate entities. For example, technology company MicroStrategy (NASDAQ:MSTR) announced it just purchased $650 million in bitcoin, and has now invested over $1 billion in 2020. This increasing demand coupled with limited supply could keep pushing bitcoin prices higher.
So I do believe cryptocurrency prices can continue to rise. I'm just not sure that bitcoin miners are the best way to invest in this trend. Even if profits for Marathon, Riot Blockchain, and Bit Digital soar in 2021, it's only a matter of time before cash flow would need to be invested in upgrading their equipment. I'm not sure that leaves much room for creating shareholder value long-term.
There are plenty of other cryptocurrency stocks that could hold more potential. Specifically, consider companies like NVIDIA (NASDAQ:NVDA). NVIDIA's products are used for gaming, artificial intelligence, and more. But it has powerful hardware that can be used in bitcoin-mining operations as well. In other words, the company could benefit from bitcoin miners buying new equipment, but its business isn't dependent upon that happening. And I think Buffett would agree that that's a better horse to bet on.
https://www.fool.com/investing/2020/12/2...gn=article
Stocks couldn't go up with bitcoin over the weekend, so they're going up today. But are mining stocks the best way to bet on the rising price of bitcoin?
Jon Quast (TMFJaguar)
Dec 21, 2020 at 8:23PM
What happened
The bitcoin rally has faded for now. According to CoinDesk, bitcoin hit an all-time high of $24,273 on Sunday, but it's pulled back about 6% as of this writing. But even though bitcoin is down today, stocks for bitcoin miners are up. Consider how these stocks ended the day:
- Marathon Patent Group (NASDAQ:MARA) was up 24%.
- Riot Blockchain (NASDAQ:RIOT) was up 10%.
- Bit Digital (NASDAQ:BTBT) was up 12%.
Now what
Investing legend Warren Buffett once said, "A horse that can count to ten is a remarkable horse -- not a remarkable mathematician." He meant that a company can be a standout when compared to others in its industry, but that doesn't necessarily make it a great business or investment opportunity. I personally think this applies to cryptocurrency miners.
Don't get me wrong, I like some cryptocurrencies, and I even bought bitcoin and Ether. I see it as a simple case of supply and demand. Specifically, the supply of bitcoin is limited -- and recently we've seen a surge in demand from corporate entities. For example, technology company MicroStrategy (NASDAQ:MSTR) announced it just purchased $650 million in bitcoin, and has now invested over $1 billion in 2020. This increasing demand coupled with limited supply could keep pushing bitcoin prices higher.
So I do believe cryptocurrency prices can continue to rise. I'm just not sure that bitcoin miners are the best way to invest in this trend. Even if profits for Marathon, Riot Blockchain, and Bit Digital soar in 2021, it's only a matter of time before cash flow would need to be invested in upgrading their equipment. I'm not sure that leaves much room for creating shareholder value long-term.
There are plenty of other cryptocurrency stocks that could hold more potential. Specifically, consider companies like NVIDIA (NASDAQ:NVDA). NVIDIA's products are used for gaming, artificial intelligence, and more. But it has powerful hardware that can be used in bitcoin-mining operations as well. In other words, the company could benefit from bitcoin miners buying new equipment, but its business isn't dependent upon that happening. And I think Buffett would agree that that's a better horse to bet on.
https://www.fool.com/investing/2020/12/2...gn=article
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