Last updated on February 11th, 2020
As investors and speculators, we’re all searching for the next “big thing” or the next “grand slam winner.”
Unfortunately, these opportunities rarely occur. Even when they do occur, it’s very difficult to capture the profits.
For example, let’s take a quick look at Amazon.
Any investor over the age of 40 had the chance to participate in Amazon’s humble beginnings with its IPO in May 1997. Yet how many people actually got on board the Jeff Bezos train and rode it for 20 years?
The answer is, “Very few.”
The internet revolution provided investors with a variety of “low hanging fruit” for easy profits.
However, most of us missed the boat and that is a perfect example of how difficult it is to profitably participate in these once-in-a-generation opportunities, even when the opportunity is staring us right in the face.
Next Big Winner – Bitcoin And Blockchain Technology?
Many investors are still waiting for the next big winner to emerge from the technology space. Unfortunately, lightning rarely strikes twice in the same place. This means there will never be another company to equal the success of Amazon in the internet & technology arena.
Instead, the next “big thing” will originate from a completely new industry.
Is it possible that the next Amazon will come from companies involved in bitcoin and blockchain technology?
These new discoveries have the potential to unleash some extremely successful companies during the next several years. However, we must remember that it’s incredibly difficult to stumble upon the next great company in any industry.
It’s even more challenging to find a profitable company in a relatively unknown industry like bitcoin and blockchain but that doesn’t mean we can’t attempt to form an educated guess.
Let’s review a few of the major players within the digital currency space. We will divide our list into three categories; low risk, moderate risk and high risk.
Low Risk Bitcoin Investments
Nvidia Corporation (NVDA)
Most investors don’t think of bitcoin when discussing the investment outlook for Nvidia. However, the company is becoming a household name in the digital currency universe.
NVDA specializes in designing graphics chips which happen to be useful in mining bitcoins and other digital currencies. These chips have the ability to handle the high amounts of computational power needed in the mining process.
The company’s CUDA graphics processing unit (GPU) is the preferred choice among the bitcoin mining crowd.
Although CUDA GPU sales have increased dramatically during the past 12 months, it still represents a relatively small part of Nvidia’s overall revenue. In its latest earnings release on February 8th, CUDA sales amounted to approximately 3% of the company’s overall revenue.
Investing in NVDA for the purpose of making money in bitcoin appears to be a rather boring investment compared to the excitement of trading bitcoin.
However, during the California “gold rush” days in the late 1840s, the big winners ultimately turned out to be the merchants who supplied the picks and shovels to the gold miners. Therefore, we should think of Nvidia as a “pick and shovel” investment.
CME Group (CME)
The CME is known as the place, “where the world comes to manage risk.” This motto is true in regard to bitcoin. The CME introduced bitcoin futures on December 18, 2017. Many digital currency traders and investors are using this new derivative to hedge a portion of their bitcoin exposure.
It’s a perfect vehicle for reducing the risk of investing in bitcoin.
Of course, the daily volume for bitcoin futures is miniscule compared to some of the popular CME trading products. The revenue generated from bitcoin futures is practically meaningless to the CME.
However, the CME is taking a “big picture” view of bitcoin and the entire digital currency universe.
If bitcoin eventually becomes linked to the global currency system, trading volume at the CME will explode. Essentially, the CME is making a long-term bet on the likelihood of bitcoin becoming a legitimate global currency.
Those who want to make the same bet could use the CME Group as their investment vehicle.
Medium Risk – Bitcoin Investments
Square Inc (SQ)
Square has found a number of ways to innovate the payment processing space.
In November 2017, the company introduced a pilot program which would allow a small number of its users to buy and sell bitcoin through the company’s popular app called Square Cash. The pilot program was quite successful. In fact, on January 31st, the company announced that it would allow all Square Cash users to trade bitcoin through its app.
Thanks to its entry into the world of bitcoin, Square is gaining market share against its two main rivals, PayPal and Apple.
All three of these companies offer a P2P platform but Square is the only company currently allowing its users to buy and sell bitcoin.
What’s likely, Square Cash users will eventually be allowed to buy and sell items using bitcoin as the method of payment.
Additionally, Square could develop a program for its merchants to accept bitcoin at the point of sale.
Square is definitely headed in the right direction as its bitcoin business continues to grow.
TD Ameritrade Holding Corp (AMTD)
TD Ameritrade is a brokerage firm based in Omaha, NE.
During the past two decades, the firm has been aggressively expanding its business by acquiring several regional brokerage firms and financial software producers. The company’s most recent acquisition involved the purchase of Scottrade, a privately held discount brokerage firm headquartered in Scottsdale, AZ.
In 2009, TD Ameritrade entered the commodity futures business by acquiring Thinkorswim, a producer of software for active traders. The company has been consistently increasing its commodity futures business by offering extremely low commission rates and a cash sweep account which transfers all excess cash to an FDIC insured sub-account.
AMTD was one of the few commodity brokerage firms which allowed its clients to trade CME bitcoin futures when the product was introduced in December 2017. The company continues to expand its operations through innovation and acquisitions.
As digital currencies continue to increase in popularity, TD Ameritrade will be one of the leaders in digital currency futures.
High Risk – Bitcoin Investment
In 2014, Overstock.com became the first major retailer to allow its customers to use bitcoin as a method of payment. The company’s CEO, Patrick Byrne, is a major proponent of bitcoin and the entire digital currency movement.
Byrne has been extremely outspoken in his support of digital currencies.
In addition to bitcoin, Overstock.com also accepts Ethereum, bitcoin cash, Litecoin, Dash and Monero. The company is a true pioneer in the retail industry in terms of accepting digital currencies as a method of payment.
In an attempt to bolster its status among digital currency enthusiasts, Overstock.com is the only major company that does not immediately transfer its digital currency sales back into US Dollars. Instead, the company retains a small percentage in a portfolio.
Of course, this turned out to be a brilliant strategic move on the part of Byrne and his company. The value of the company’s digital currency portfolio has increased dramatically during the past 12 months.
Overstock.com is also investing in a blockchain-based securities lending system designed to compete with the major Wall Street firms. This new project operates under the umbrella of Medici Ventures, the company’s wholly owned subsidiary which invests exclusively in blockchain technology.
Medici Ventures is a perfect example of how Overstock.com is a true leader in the digital currency movement.
Bitcoin Investment Trust (GBTC)
GBTC was launched in September 2013, by Digital Currency Group.
It is the only traditional investment vehicle which allows investors the opportunity to gain exposure to the price movements of bitcoin without the challenge of buying, storing and safekeeping bitcoins.
GBTC trades over-the-counter on the OTCQX market.
Many investors believe Bitcoin Investment Trust is an ETF.
Actually, GBTC is a grantor trust, which basically means it is not registered with the Securities and Exchange Commission under the Investment Company Act of 1940. As far as investors are concerned, the legal structure of GBTC is inconsequential and rather unimportant.
Instead, the most important aspect of GBTC is the fact that it is incredibly popular among digital currency enthusiasts.
Bitcoin Investment Trust is a great way for investors to gain access to bitcoin using a more traditional investment vehicle.
However, owning GBTC does come with a hefty price tag.
Digital Currency Group charges investors an annual fee of 2% to manage the assets within the grantor trust. For the sake of comparison, the average annual fee for an ETF is 0.4%.
At the end of the day, those who purchase GBTC are simply speculating on the future price direction of bitcoin. Of course, it’s impossible to forecast the price of bitcoin. However, it’s probably safe to say that bitcoin will generate extreme levels of volatility for the next several years.
Additional Bitcoin Investments
- First Bitcoin Capital Corp (BITCF) Extremely High Risk
- Bitcoin Services Company (BTSC) Extremely High Risk
- Riot Blockchain Inc (RIOT) Extremely High Risk
- Marathon Patent Group (MARA) Extremely High Risk
- Net Element Inc (NETE) Extremely High Risk