Investors have good reason to be concerned about buying into the cryptocurrency craze. Some of the world’s most respected money managers and central bankers have declared bitcoin and its various competing digital coins to be in a bubble, warning buying them is closer to gambling than investing.
Some investors also balk at investing in something with no physical form; a bitcoin only exists as a few lines of unique computer code.
For those not dissuaded by the former concern, there is a way to overcome the latter: by investing in producers of the complex machinery required to maintain the cryptocurrency ecosystem. Below, BNN highlights a few examples.
While this Chinese company remains privately held, it is by far the world’s largest producer of ASIC (application-specific integrated circuit) chips specially designed to mine bitcoin. It doesn’t just produce and sell those mining units around the world, but the company is also believed to control one the world’s largest cryptocurrency mining operations, built using its own technology.
Right now it takes a high-profile investor - the likes of Sequoia Capital or IDG Capital – to be able to buy a piece of Bitmain, but the company said in August 2017 that it was weighing an initial public offering, so retail investors may eventually gain an inroad.
HUT 8 MINING CORP
Outside of Bitmain, there is only one other major global crypto-focused ASIC producer: Amsterdam-based BitFury Group. Unlike Bitmain, which sells individual ASIC chips, Bitfury sells what it calls a BlockBox: 100,000 ASIC chips crammed into a 40-foot shipping container capable of mining nearly 50 bitcoins per month (based on the coin’s market value at the end of January 2018).
BitFury is also privately held, but a reverse takeover-style agreement struck with Vancouver-based Hut 8 Mining late last year has opened up an opportunity for Canadians to invest directly in crypto mining infrastructure. Hut 8 started trading on the TSX Venture Exchange earlier this week and is 43 per cent owned by BitFury.
“BitFury is Hut 8, that is the way you can see it,” Hut 8 CEO Sean Clark told BNN in an interview on Wednesday. “No other miner that is publicly traded right now has a guaranteed access to chips.”
The plan is to have 60 megawatts worth of BitFury mining farms operating across Canada by mid-2018, which would more than triple Hut 8’s current capacity. As of March 5th it had mined a total of 645 Bitcoins, but the company’s name implies major ambitions: it comes from the facility in England where famed mathematician Alan Turing broke the enigma code that changed the course of World War II.
Before the crypto world ran on specialized ASIC chips, it ran on plain old graphics processing units (GPUs). Bitcoin and various other coins started with GPUs, which exist in every personal computer to handle the showing of videos and the playing of video games, but have since moved on to an ASIC-based ecosystem. Yet there are still hundreds of digital coins being supported by GPUs, including some of the largest bitcoin rivals like Ethereum and Monero.
“Crypto appears to be helping Advanced Micro Devices disproportionately,” BMO semiconductor analyst Ambrish Srivastava told clients in a research note published last month.
According to Mercury Research, nearly four million GPUs were sold in the final three months of 2017 solely to mine various cryptocurrencies and process their transactions. That figure more than doubled crypto-based GPU demand in the prior three-month period and the BMO report found AMD commanded a whopping 64 per cent of the market for crypto GPUs.
The rising tide of crypto demand for GPUs is raising all boats to some extent, with chief AMD rival Nvidia reportedly hiking prices by more than 80 per cent for its own graphics processors.