2021 has already turned out to be an exciting year for cryptocurrencies with Bitcoin doubling in price and it’s still only February. While that is monumentally impressive, it’s almost unbelievable that it hit an all time high of $58,000 this week after finding a low of $3800 less than a year ago. The rest of the crypto market has enjoyed a rally as well with Ethereum and many other crypto currencies also soaring to new highs. The media is on board with this bull run and you can’t read or listen to anything remotely related to finance without mention of crypto. However, one area that has overperformed but we don’t hear much about is the blockchain stock sector. Some of these stocks have made far greater gains than Bitcoin just by being part of the crypto industry. Their stocks have provided a proxy to invest in crypto through the traditional markets without having to navigate crypto exchanges and self custody.
At TRI we began following blockchain stocks back in 2019. Being crypto enthusiasts who also trade the stock market, we were very interested in any companies that were entering the crypto space. Just as gold investors like to trade gold mining companies we saw a similar opportunity with these blockchain stocks. If we expected Bitcoin to do well it was logical that a Bitcoin mining company would also do well. At that time these companies were trading at the bottom of their range and no one was interested. They continued to trade at great value until finally bottoming in March 2020 along with the rest of the market.
Here are four blockchain companies we traded:
Riot Blockchain Inc. (RIOT)
Riot Blockchain is a Bitcoin Mining company based in Castle Rock, Colorado.
$.51 to $79.50 - 140x off low in March 2020
Marathon Patent Group, Inc. (MARA)
Bitcoin mining company in Hardin, Montana
$.35 to $49.14 - 139x off low in March 2020
Galaxy Digital (GLXY)
Digital Asset management company founded by billionaire investor Michael Novogratz.
$.56 to $20 - 26x off low in March 2020 (Canadian Stock)
Hut 8 Mining (HUT)
Bitcoin mining company with facilities in Alberta, Canada
$.51 to $15.98 - 30x off low in March 2020 (Canadian Stock)
All four of these names have outperformed Bitcoin in the last year with RIOT and MARA making astounding 140X moves. And while these four companies all performed incredibly well, most blockchain stocks produced similar returns. Trading crypto proxies via the stock market turned out to be a good idea that vastly outperformed Bitcoin.
What’s next for this sector?
These assets are highly correlated with Bitcoin and will likely continue to move along with it. If Bitcoin continues higher than these stocks are expected to do the same. That said, it’s hard to make a case for value at these prices and any TRI’er knows that we simply can’t be a buyer at these levels. At some point down the road a top will come in on Bitcoin and we will go through the process of cleaning up this parabolic bull. As investors, it is absolutely important for us to remain patient and disciplined and give this time to resolve. Eventually a new bottom will be put in. As a crypto macro bull, I will be more than happy to step back in on these blockchain stocks when my setup comes in. In the meantime I’ll be actively watching this space to see what new companies and developments present a trade opportunity. Good luck and happy trading!
Author has long positions in Bitcoin, Ethereum, RIOT and HUT. This article is for entertainment purposes only and is not financial advice. Consult with your professional financial advisor before making any investment decisions regarding the assets mentioned.