Last year, cryptocurrencies burst onto the scene like no other asset class ever has. Over the span of 12 months, the aggregate value of digital currencies soared almost $600 billion, which in percentage terms worked out to more than 3,300%. This was probably the best single-year return for any asset class in history, and we may never see anything like it again.
However, not everyone who's made money off the cryptocurrency craze has done so as a traditional investor. Some individuals and businesses have made veritable fortunes by "mining" cryptocurrency.
Image source: Getty Images.
Cryptocurrency mining describes the process by which persons and/or businesses with high-powered computers and servers compete against one another to solve highly complex mathematical equations that are the result of the encryption designed to protect transactions on a blockchain network. The first to solve a group of equations and verify that those transactions (known as a block) are true -- i.e., that the same virtual token wasn't spent twice -- receives what's known as a "block reward." This reward is paid out in tokens of the virtual currency that's being proofed.
For example, bitcoin currently has a block reward of 12.5 tokens. This means that the first person, group of individuals, or business to validate a block of transactions will receive 12.5 bitcoin tokens. With the world's most valuable cryptocurrency currently hovering just above $8,000 per coin, we're talking about a more than $100,000 haul for cryptocurrency miners who are successful in beating others to the proverbial punch.
Of course, there are other factors that need to be kept in mind. There are exorbitant costs involved with crypto mining, too. This is a highly electricity-intensive practice that uses dozens, hundreds, or thousands of hard drives, processing units, and servers, to solve complex equations. Not only does this rack up quite the electric bill, but it creates a lot of heat, which may also require a cooling system. Also, hardware becomes obsolete rather quickly, requiring miners to regularly upgrade their equipment to remain competitive.
What's more, not all virtual currencies are mineable. While well-known cryptocurrencies like bitcoin, Ethereum, Bitcoin Cash, Litecoin, Monero, and Dash are mineable, others, such as Ripple, EOS, Cardano, Stellar, IOTA, and NEO, have a different method of transaction validation known as proof of stake. With proof of stake, owners of cryptocurrency are randomly chosen to validate transactions. There is no competition, and more importantly, virtually no added electricity costs.
Image source: Getty Images.
Though cryptocurrency mining has been profitable, it's clearly not feasible for everyone. Nevertheless, there are ways investors can gain exposure to crypto mining, should they choose, through the stock market. Here are four top cryptocurrency mining stocks that have either direct or partial exposure, based on sales, to the industry.
Perhaps the most prominent names of the bunch are NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), which are best known for their graphics card and PC-based microprocessors, respectively. Neither company has exactly been forthcoming with regard to how much of their sales are tied to cryptocurrency mining, but each company has clearly benefited in recent quarters from the sale of graphics processing units (GPU). NVIDIA's full-year results pointed to 41% year-over-year sales growth, with Advanced Micro's sales up 25% on an annual basis.
In fact, demand for GPUs has been so strong that the price of graphics cards, new and old, has been shooting higher. This actually creates a bit of a conundrum for NVIDIA and AMD, as Advanced Micro Devices is more commonly known. The core customers for both companies are avid gaming enthusiasts and enterprise clients. If crypto mining demand continues to pluck supply from the market, the high price for graphics cards could cause a rebellion among NVIDIA's and AMD's core customers. Then again, if these companies create a product specifically for crypto mining, they'll drive down prices by increasing supply and squash the sales and margin boost they've recently experienced.
While both companies certainly have a lot going on beyond the cryptocurrency mining industry, it's possible that their share prices could reflect the ebbs and flows of virtual currency token prices, so it's something to keep in mind.
Image source: Getty Images.
Another burgeoning cryptocurrency mining stock that isn't exactly keen on divulging the percentage of its sales tied to mining is Taiwan Semiconductor Manufacturing Company (NYSE:TSM). Last week, TSMC reported strong first-quarter operating results that included a 6% increase in sales from the prior-year period, as well as its single-best sales month in history in March ($3.5 billion). C.C. Wei, TSMC's president and co-CEO, specifically said that "these results were mainly driven by strong demand from high performance computing such as cryptocurrency mining."
In addition, Coindesk notes that Chinese mining hardware maker Bitmain, a client of TSMC, unveiled its next-generation, ASIC (application-specific integrated circuit)-based, Ethereum mining equipment called Antminer E3 in early April. The unit, which has a list price of $800, is set to ship in July. Bitmain's need for ASIC chips to satisfy demand for Antminer E3 may very well be the reason TSMC experienced a surge in sales during March and in Q1 as a whole.
However, the downdraft in bitcoin and other crypto token prices in 2018 has certainly cast a shadow on industry demand moving forward. Having previously forecast sales growth of 10% to 15% in 2018, TSMC also lowered its sales growth expectations to 10% for the current year on uncertainty in the crypto mining space. Like NVIDIA and AMD, TSMC's share price may be adversely impacted if cryptocurrency prices continue to sink.
Image source: Getty Images.
Now, if you want as much cryptocurrency mining exposure as possible without actually running your own mining operation, there's the over-the-counter exchange-listed HIVE Blockchain Technologies (NASDAQOTH:HVBTF). This publicly traded cryptocurrency mining firm is currently in the process of ramping up its operations in Sweden and Iceland, and envisions generating approximately $150 million in annual revenue from its operations. Sweden and Iceland offer commercial kilowatt-per-hour electricity prices that are well below the European average. Plus, these are relatively temperate nation's, which may aid in keeping mining equipment cool.
Now here's where things really get interesting. Despite being a crypto mining start-up, HIVE Blockchain already turned a profit in its most recently reported quarter. Sure, the $149,724 in profit was negligible and resulted in $0.00 in earnings per share, but that profit was derived from just over $3 million in quarterly sales. Presumably, HIVE could generate more than 10 times this each quarter when fully ramped up.
The wildcard here is what'll happen to cryptocurrency prices. You see, HIVE Blockchain isn't necessarily selling all of the Ethereum, Ethereum Classic, and ZCash tokens that it's mining. It hangs on to some of these coins in the hope that they'll appreciate in value. Thus, investing in a company like HIVE gives an investor direct access to crypto mining margins, as well as the movement in a handful of popular digital currencies.
Like the other companies above, there are also plenty of risks. Given that its business is entirely devoted to crypto mining and lacks sales diversity, investors would need to understand that if virtual currency prices fall considerably, their investment in HIVE could dive. Furthermore, in order to raise capital, it wouldn't be surprising if HIVE Blockchain diluted existing investors with bought-deal offerings. These are the risks that stock investors would have to endure if they wanted direct access to a publicly traded cryptocurrency mining stock.
- Cryptocurrency - CES 2020 - December 4th, 2019
- What is Cryptocurrency? A Simple Explanation - December 4th, 2019
- 8 Best Blockchain & Cryptocurrency Books To Read in 2019 ... - December 4th, 2019
- What Is Cryptocurrency Mining? - Mycryptopedia - December 4th, 2019
- Best Places to Earn Interest on Your Cryptocurrency - Crypto Briefing - December 4th, 2019
- Cryptocurrency 101 in the South Bronx - The New Yorker - December 4th, 2019
- Bitcoin Corrects And What's Next - Seeking Alpha - December 4th, 2019
- Drugs hidden in childs toy lead police to massive $1M cryptocurrency stash - The Next Web - December 4th, 2019
- Chinas blockchain consortium adds cryptocurrency exchange Huobi to its alliance - FXStreet - December 4th, 2019
- Want to Pay for Your Stay with Cryptocurrency? Head to Vir Island - Total Croatia News - December 4th, 2019
- Thai SEC to Amend its Royal Decree on Cryptocurrency - The Tokenist - December 4th, 2019
- German Banks Will Be Allowed to Buy, Sell, and Store Cryptocurrency Starting New Years Day Crypto.IQ | Bitcoin and Investment News from Inside... - December 4th, 2019
- India vs. the people: The battle over cryptocurrency ownership continues - Forkast News - December 2nd, 2019
- Cryptocurrency This Week: Binance Launches Ethereum Futures, Hackers Steal $50 Mn From Korean Exchange And ... - Inc42 Media - December 2nd, 2019
- China Shuts Down 173 Cryptocurrency Exchanges and Token-Issuing Platforms - BeInCrypto - December 2nd, 2019
- More traditional investors are eyeing cryptocurrency to diversify their portfolios - Forkast News - December 2nd, 2019
- U.S. Authorities Arrest Virgil Griffith For Teaching Cryptocurrency And Blockchain - Forbes - November 30th, 2019
- What Hides Behind South Korean Cryptocurrency Regulation Policy? - The Diplomat - November 30th, 2019
- CipherTrace Q3 2019 Cryptocurrency AML Report: 2/3 of the Top 120 - AiThority - November 30th, 2019
- Cryptocurrency Crime Spikes This Year and SMBs are Paying the Price - Commercial Integrator - November 30th, 2019
- $150 Billion Cryptocurrency Boom Is Here Buy This ETF to Profit - Banyan Hill Publishing - November 30th, 2019
- Cryptocurrency crime surges, losses hit $4.4 billion by end-September: CipherTrace report - Reuters - November 28th, 2019
- More traditional investors are eyeing cryptocurrency to diversity their portfolios - Forkast News - November 28th, 2019
- Binance CEO: China has never been pro-Bitcoin or pro-cryptocurrency - AMBCrypto - November 28th, 2019
- Nearly $50 Million of Ether Swiped From South Korean Cryptocurrency Exchange - The Wall Street Journal - November 28th, 2019
- The Cryptocurrency Market Update: Bitcoin back on recovery track, Ripple and Ethereum follow the lead - FXStreet - November 28th, 2019
- What the Crypto Markets Are Saying About the Future of Bitcoin - Coindesk - November 28th, 2019
- Thailand: Cryptocurrency Law Will Change in 2020 to Stay Competitive - Cointelegraph - November 28th, 2019
- Navigating the Token Crypt: What Options Are Available For Investing Cryptocurrency? - Nasdaq - November 28th, 2019
- This Cryptocurrency Is Up 11310% in a Week. Legit Scam or Just Legit? - CCN.com - November 28th, 2019
- The Cryptocurrency Market Update: Bitcoin sits above $7,000 as the trading range is narrowing - FXStreet - November 28th, 2019
- Cryptocurrency policies must combat snake oil without stifling innovation - The Globe and Mail - November 28th, 2019
- Akon has started building Akon City in Senegal with focus on cryptocurrency and renewable energy - Evening Standard - November 28th, 2019
- Cryptocurrency steps closer to legalization in South Korea - CoinGeek - November 28th, 2019
- Dwight Schrute tells Bitcoin holders to give their worthless cryptocurrency to a non-profit - The Next Web - November 22nd, 2019
- VinDAX Is the Seventh Cryptocurrency Exchange Hacked This Year: What Should Investors Be Considering? - Lexology - November 22nd, 2019
- Bitfinex Announces Strategic Collaboration with ODEM to Expand Cryptocurrency and Blockchain Education - PRNewswire - November 22nd, 2019
- How a seven-week Wharton course brings the study of cryptocurrency to the classroom - The Daily Pennsylvanian - November 22nd, 2019
- The cryptocurrency market update: Bitcoin bears have an upper hand - FXStreet - November 22nd, 2019
- Sacramento Kings Lead The Way For Sports In Cryptocurrency Solutions - Front Office Sports - November 22nd, 2019
- This week in Cryptocurrency - Born2Invest - November 22nd, 2019
- South African cryptocurrency exchanges will be having their bank accounts shut down - FXStreet - November 22nd, 2019
- PayPal CEO Holds Bitcoin and Only Bitcoin - Cointelegraph - November 22nd, 2019
- Cryptocurrency exchange that went dark with $16M in user funds only has $45k, report - The Next Web - November 20th, 2019
- Cryptocurrency market update: $5 billion wiped off as Bitcoin bears take a breather - FXStreet - November 20th, 2019
- The cryptocurrency market update: Bitcoin bears hit the pause button - FXStreet - November 20th, 2019
- This cryptocurrencys price just pumped 7,000%, but why? - Decrypt - November 20th, 2019
- Swedish gold-for-cryptocurrency scammer finally extradited to US - The Next Web - November 20th, 2019
- Binance US Adds Nano (NANO) as Its 26th Cryptocurrency - SludgeFeed - November 20th, 2019
- Is the IRS HODLing Out on Us? IRS Issues Additional Cryptocurrency Guidance Addressing Hard Forks, Soft Forks, and Airdrops - JD Supra - November 20th, 2019
- Maksim Zaslavskiy of the cryptocurrency Recoin was sentenced to 18 months in prison for lying to investors - Crain's New York Business - November 20th, 2019
- Cryptocurrencies | Category | Fox Business - November 1st, 2019
- Best cryptocurrency to Invest 2019 - The Complete Guide - November 1st, 2019
- Best Cryptocurrency to Invest 2019 Our Top 4 Picks - October 22nd, 2019
- Buy Cryptocurrency with Credit Card or Bank Transfer now ... - September 30th, 2019
- Best 10 Cryptocurrency Brokers - Updated for 2019 (Safe ... - September 30th, 2019
- Fidelity Said to Offer Cryptocurrency Trading Within a Few ... - May 10th, 2019
- Is This Cryptocurrency The Next Bitcoin? - forbes.com - April 28th, 2019
- Cryptocurrency Definition | Bankrate.com - April 26th, 2019
- Samsung is developing its own blockchain network, report claims - April 26th, 2019
- 2019s best cryptocurrency wallets | 70+ compared | finder.com - April 26th, 2019
- What is cryptocurrency? - Definition from WhatIs.com - April 25th, 2019
- A Beginner's Guide to Cryptocoin Mining: What You Need to ... - April 25th, 2019
- How Cryptocurrency Assets Are Becoming A New Battleground In ... - April 21st, 2019
- What is Cryptocurrency: Cryptocurrency Explained the Easy Way - April 13th, 2019
- How to trade cryptocurrency in the UK - finance.yahoo.com - April 8th, 2019
- Cryptocurrency Trading | TD Ameritrade - April 8th, 2019
- Cryptocurrency Prices, Charts, and Market Cap Data - UNHASHED - April 8th, 2019
- Blow To Bitcoin As World's Largest Cryptocurrency IPO Is Iced - April 2nd, 2019
- How and where do I report Cryptocurrency coin-to-coin ... - March 22nd, 2019
- Hundreds of Millions in Cryptocurrency Vanishes After ... - March 11th, 2019
- Fidelity's new cryptocurrency company is up and running ... - March 9th, 2019
- Cryptocurrency Exchange Says It Can't Access $190 Million ... - February 5th, 2019
- What's the Best Cryptocurrency to Invest in Today? - January 9th, 2019
- Cryptocurrency Trading Easy tips to get started | AvaTrade - January 9th, 2019
- Thailand Issues 4 Cryptocurrency Licenses, Rejects 2 ... - January 9th, 2019
- NASDAQ, Fidelity Invest in New Cryptocurrency Exchange ... - January 9th, 2019
- Cryptocurrency News | Cryptocurrency News | Blockchain ... - January 9th, 2019
- Differences Between Cryptocurrency Coins and Tokens - January 9th, 2019
- Cryptocurrency Charts - January 8th, 2019