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 as an alternative during times of inflation - ITProPortal - July 8th, 2020
- The lawfulness of cryptocurrency mining in Bulgaria - Lexology - July 8th, 2020
- Cryptocurrency-Focused Docuseries Airs to Millions of Viewers via the Discovery Science Channel - Bitcoin News - July 8th, 2020
- Cryptocurrency Market News: Twitter users can send Bitcoin and crypto to each other thanks to a new service - FXStreet - July 8th, 2020
- AI, blockchain, cryptocurrency all part of actor/entrepreneur's vision for universal healthcare - AI in Healthcare - July 8th, 2020
- What are Cryptocurrency Signals and their role in trading - TechGenyz - July 8th, 2020
- Cryptocurrency Market Update: Cardano to the moon as Bitcoin, Ethereum and Ripple stall - FXStreet - July 8th, 2020
- Latest News On The Cryptocurrency Market | Intel, CoinBase, BitGo, and Binance - Owned - July 8th, 2020
- New Token Listing Alert: Levolution's LEVL Token is Officially Live on Changelly - PRNewswire - July 8th, 2020
- 2.6 million people in the UK bought cryptocurrency - The Paypers - July 8th, 2020
- The Profitability of Cryptocurrency Bitcoin Now and in the Future - Chiang Rai Times - July 8th, 2020
- Cryptocurrency Cardano increased by 15% - The Times Hub - July 8th, 2020
- Cryptocurrency Cardano grew by 10% - The Times Hub - July 8th, 2020
- Cryptocurrency trading vs. forex: The similarities and differences - AZ Big Media - June 25th, 2020
- Financial Inclusion, Cryptocurrency and the Developing World - Cointelegraph - June 25th, 2020
- Phishing and cryptocurrency scams squashed as one million emails are reported to new anti-scam hotline - ZDNet - June 25th, 2020
- 83% of BTCs addresses are smiling to the Bank - Nairametrics - June 25th, 2020
- Protesters Around The World Are Putting Their Hopes Into Cryptocurrency - Forbes - June 25th, 2020
- The Benefits of Cryptocurrency Trading Crypto Benzinga - Benzinga - June 25th, 2020
- Miners Are Sending Bitcoins to Exchanges Again and That May Be Bearish - CoinDesk - CoinDesk - June 25th, 2020
- Akon City: $6 Billion Cryptocurrency City Set to Begin Construction | News - Bitcoin News - June 25th, 2020
- UNICEF Cryptocurrency Fund announces its largest investment of startups in developing and emerging economies - UNICEF - June 25th, 2020
- NetCents Technology paves the way for mainstream cryptocurrency adoption by offering daily settlements to merchants - Proactive Investors USA &... - June 25th, 2020
- Cryptocurrency Market Share Analysis and Research Report by 2025 - CueReport - June 25th, 2020
- From Ethereum to Stellar, to Solana: Cryptocurrency Kin Confirms Blockchain Migration - CoinDesk - June 25th, 2020
- Jim Rogers Discusses Bitcoin as Money and Why Governments Will Stop Crypto | News - Bitcoin News - June 25th, 2020
- Latest News On The Cryptocurrency Market | Bitmain, NVIDIA, Xilinx, Intel, Advanced Micro Devices, Ripple, Bitfury, Ethereum Foundation, CoinBase,... - June 25th, 2020
- EY Launches First-Of-Its-Kind Cryptocurrency Reporting App - PRNewswire - June 25th, 2020
- Cryptocurrency: Redefining the Future of Finance - Visual Capitalist - June 16th, 2020
- A Cryptocurrency User Paid $2.6M In Transaction Fee To Send $136 Twice - Benzinga - June 16th, 2020
- Cryptocurrency Regulations in times of COVID-19: A boon or bane to India? - Lexology - June 16th, 2020
- Are CryptoCurrencies The Future Of Finance? - Digital Information World - June 16th, 2020
- Nevermind Coinbase Big Brother Is Already Watching Your Coins - Cointelegraph - June 16th, 2020
- Fireblocks integrates with Chainalysis to set a new compliance and security standard for financial institutions and cryptocurrency businesses -... - June 16th, 2020
- Creating A Crypto-Exchange - The Types & The Steps - YourStory - June 16th, 2020
- Cryptocurrency Market News: Bitcoin and the rest of cryptos following the global stock market - FXStreet - June 16th, 2020
- Latest Update 2020: Cryptocurrency Market by COVID19 Impact Analysis And Top Manufacturers: ZEB IT Service, Coinsecure, Coinbase, Bitstamp, Litecoin,... - June 16th, 2020
- Latest News On The Cryptocurrency Market | Intel, CoinBase, BitGo, and Binance - WorldsTrend - June 16th, 2020
- Justice Gets 15 Guilty Pleas for International Crime Ring that Laundered Money Through Cryptocurrency Exchanges - Nextgov - June 13th, 2020
- Why Bitcoin Suddenly Dropped 6% on Thursday - CoinDesk - CoinDesk - June 13th, 2020
- Cryptocurrency Mining Hardware Market Growth Trends, Key Players, Competitive Strategies and Forecasts to 2026 - Jewish Life News - June 13th, 2020
- Cryptocurrency Market News: Bitcoin drops to $9,100, the rest of the market follows suit - FXStreet - June 13th, 2020
- Due to COVID-19 Cryptocurrency Market Groundwork 2020: Provides an In-Depth Analysis on the Future Growth Prospects and Global Market Trends Forecast... - June 13th, 2020
- Binance Launches Quarterly BTC/USD Futures With Up To 125x Leverage - Benzinga - June 13th, 2020
- CashTelex Is Driving Mainstream Crypto Adoption Through Its Brand New Physical Asset-Backed Cryptocurrency CTLX - Yahoo Finance - June 13th, 2020
- Chainalysis Partners with A&D Forensics, Expanding Access to its Cryptocurrency Investigative Tools in Africa - bitcoinke.io - June 13th, 2020
- Cryptocurrency Can Become a Medicine to Treat the Challenges Caused by Covid-19 - Coin Idol - June 13th, 2020
- Global Cryptocurrency Mining Market Expected to Reach Highest CAGR by 2025 Top Players: Advanced Micro Devices, Inc, Russian Miner Coin, Halong... - June 13th, 2020
- The emerging world of cryptocurrency - Global Banking And Finance Review - June 13th, 2020
- Someone paid $2.6 million in fees to move $134 worth of crypto and oops - Mashable - June 11th, 2020
- 80% of US and European Institutional Investors Find Cryptocurrency Appealing: Survey - Bitcoin News - June 11th, 2020
- Zilliqa, the fast-rising cryptocurrency that has gained more than 845% since March - Nairametrics - June 11th, 2020
- Cryptocurrency misappropriation, hacking, theft and fraud on target for banner year - JD Supra - June 11th, 2020
- Cryptocurrency Quotes and Forecasts: Last Updates on Cryptocurrencies - FinSMEs - June 11th, 2020
- Europol busts $17 million illegal Netflix site that used cryptocurrency - Decrypt - June 11th, 2020
- Watch | What is crypto-jacking? - The Hindu - June 11th, 2020
- Cryptocurrency and Capital Gains: The Sources of Vermont Candidates' Wealth - Seven Days - June 11th, 2020
- Cryptocurrency Market 2020 | Scope of Current and Future Industry 2026 - Surfacing Magazine - June 11th, 2020
- Meet ZCash, the cryptocurrency that protects your privacy better than Bitcoin - Nairametrics - June 11th, 2020
- Riot Blockchain Continues Optimization of Mining Operations - AiThority - June 11th, 2020
- GPU as a Service Market to Witness Remarkable Gains From Cryptocurrency Mining Applications 2025 - 3rd Watch News - June 11th, 2020
- Cryptocurrency Market Update: IOTA rockets to the moon Bitcoin, Ripple and Ethereum in consolidation - FXStreet - June 11th, 2020
- The Bull & The Bear: Dispelling, Confirming Myths and Truths About Crypto - Money and Markets - June 11th, 2020
- Trio of Analysts Bullish on Ethereum (ETH) As Cryptocurrency Shows Robust Fundamentals - The Daily Hodl - June 11th, 2020
- Cryptocurrency Market Update: Bitcoin needs to settle above $10,600 to avoid the sell-off - FXStreet - June 11th, 2020
- Regulating cryptocurrency exchanges - The Indian Express - June 2nd, 2020
- Russia Sort Of Dropped The Hammer On Bitcoin, Crypto - Forbes - June 2nd, 2020
- Cryptocurrency This Week: Indian Crypto Exchanges Witness Surge In New Users, Bitcoin Sees $1000 Spike & More - Inc42 Media - June 2nd, 2020
- SEC Wins Terminating Sanctions Against Cryptocurrency Creator - Law Street Media - June 2nd, 2020
- Bitcoin hodl waves indicate 60% of the cryptocurrency is being hoarded analysts suggest a bull run could be - Business Insider India - June 2nd, 2020
- Cryptocurrencies and Online Gaming: 4 Use Cases - the blockchain land - June 2nd, 2020
- Cryptocurrency Market News: Its a sea of red in the crypto market today - FXStreet - June 2nd, 2020
- Japanese Finance Minister May Be Opposed to Lowering Tax on Crypto - Cointelegraph - June 2nd, 2020
- Bitcoin Cash Vietnam-Based Fiat-to-Crypto Trading Support Added to Bvnex Exchange | Exchanges - Bitcoin News - June 2nd, 2020
- Crypto.com Becomes the First Cryptocurrency Company in the World to Achieve ISO/IEC 27701:2019 Certification - WFMZ Allentown - June 2nd, 2020
- Todays cache | Crypto-jacking, and more - The Hindu - June 2nd, 2020
- The Ethereum cryptocurrency has risen above $250,71, showing an increase of 5% - The Times Hub - June 2nd, 2020
- Chinas Cryptocurrency Legitimate Threat to Bitcoin and Dollar - Move Your Money - June 2nd, 2020
- Latest News On The Cryptocurrency Market | Intel, CoinBase, BitGo, and... - Azizsalon News - June 2nd, 2020
- As Bitcoin Flounders, This Tiny Cryptocurrency Has Soared Over 200%Heres Why - Forbes - May 23rd, 2020