On June 18, 2019, Facebook, Inc. (NASDAQ: FB) issued its Libra white paper and provided details of its new global digital currency. I believe that this will significantly increase interest in cryptocurrencies for a number of reasons. Hive Blockchain Technologies Ltd. (OTCQX:HVBTF) represents an opportunity to establish a position in the blockchain space.

Investment thesis

I want to stress that investment in cryptocurrency stocks is fraught with a multitude of perils and pitfalls. The pronounced volatility of virtually all of the stocks trading in this industry segment is legendary. The duality of viewpoints regarding investing in this arena is evidenced by a Seeking Alpha article that stated “10-20% of a portfolio’s holdings should be allocated to digital assets.”

This viewpoint contrasts with that of Frank Holmes, the Interim Chairman of HIVE Blockchain Technologies (hereafter referred to as HIVE), who has said a 1% allocation to cryptocurrencies is sufficient for most investors. I’m even more conservative than Mr. Holmes and I believe that 0.005% is adequate to become a “crypto entrepreneur.” The bottom line is this type of investment should be strictly “mad money” investing and considered only by highly tolerant risk takers. Caveats aside, HIVE has distinguished itself from several other companies profiled here on Seeking Alpha as enumerated in this article.

Why HIVE?

Here’s a screenshot of HIVE’s website, whose mission statement is “powering the future of blockchain computing.”

https://lh4.googleusercontent.com/7O0fmUXlUmjCBfsoQLCkqY9__beHNemgH1DlnT6etOFwMsYwEjh5hGITGnXbL2HWOeVVbINnqLqsD3kAaWSE9C6-UVeziAphSDYWHwUVflrP4Ux1IRvUWZM02ifXzrlEfoySGkLM

HIVE traces its roots to 1987 when the company was founded as Leeta Gold. It languished for almost 30 years with little success until it pivoted in 2017 and became the first publicly-traded cryptocurrency miner in Canada. The company’s value proposition is strictly an Accounting 101 concept: revenue minus expenses equals profit or loss. However, the complicating issue is the abject volatility of cryptocurrency prices and the sobering fact that both bitcoin and ethereum – the two major digital currencies that HIVE mines – plummeted more than 80% in value in 2018, which presumably had a profound effect on HIVE’s revenues. However, the prices of cryptocurrencies referred to above have risen quite sharply in 2019, which is a positive sign for the industry as a whole. HIVE in particular will benefit since electricity prices in Sweden have declined by 70% since the beginning of the year, which will greatly improve the company’s expense structure since electricity costs represent a major expense for crypto mining companies. The graph below shows the positive correlation between the prices of bitcoin and HIVE stock for 2019:

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HIVE Chart

If this trend continues, HIVE’s revenues may not thrive, but I would expect a meaningful spike. The combination of potentially higher revenues with lower costs makes HIVE a company to seriously consider for qualified investors.

HIVE compares quite favorably to 3 other crypto stocks

Let’s review relevant key financial metrics of 3 crypto stocks which have been covered by other Seeking Alpha contributors.

Company Symbol

HVBT

MARA

OTCQB:MGTI

RIOT

52 W HIGH

$0.70

$4.28

$0.78

$7.39

52 WK LOW

$0.17

$1.32

$0.03

$1.29

EPS (FWD)

$ – 0.33

$ – 1.17

$ – 0.07

$ – 0.21

MARKET CAP

$110.7M

$13.6M

$9.2M

$35.3M

ENTERPRISE VALUE

$100.7M

$12.7M

$9.6M

$42.3M

HIVE’s stock price has decreased less than the average of both the 3-month and 12-month performances of its peer group. In addition, HIVE’s stock price is currently at a higher percentage of its 52-week high compared to the average of the other 3 stocks listed in the above table. HIVE’s market cap (which I consider the best metric of what nano-cap stocks are worth in the marketplace) is ~ 5 times more than the average market cap of MARA, MFTI and RIOT. The following are links to relevant news regarding the 3 countries where HIVE’s operations are located:

Iceland

Sweden

Norway

Another positive is that HIVE is partially owned by Genesis Mining (25.6%) and Fidelity Investments (9.7%), both of whom have been long-term holders of HIVE stock. In addition, a protracted legal dispute between HIVE and Genesis Mining which had negatively affected HIVE both financially and operationally has recently been resolved which bodes well for HIVE’s stock price going forward. In addition, a niggling overhang on the stock’s performance will soon be resolved. On July 26, 2019, HIVE announced that it expects to submit its Annual Filings on or before August 28, 2019. This is of much interest to me as a former CPA as investors will have much more clarity regarding the financial status of the company, which according to The Motley Fool is cash-flow positive. HIVE was named as a 1 of 3 stocks to buy in August 2019 which further enhances the stock’s credibility in this burgeoning market segment. It would appear to me that increased visibility regarding HIVE is likely to also enhance HIVE’s stock appreciation potential.

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The Winklevoss twins and the fear of missing out (FOMO)

The poster boys for the FOMO crowd are Cameron and Tyler Winklevoss of Facebook “fame” who invested $1M of their $65M settlement from Mark Zuckerberg and began buying bitcoin in 2013. They were reported to be the first “bitcoin billionaires” in 2017, and their rise to the top 0.001% is chronicled by best-selling author Ben Mezrich’s book which the author recommends as required reading for those who see themselves as becoming the next iteration of the Winklevoss twins. The current euphoria regarding the future of cryptocurrencies is demonstrated by an August 4, 2019, Forbes article entitled “Here’s the Case for a $100,000 Bitcoin Price by the End of 2021.” I consider such a mainstream media article proof-positive that cryptocurrency investors are the penultimate “hope and dreamers.” For those unable (or unwilling) to meet the $10M ante to join the Libra Association or may not want to buy the actual digital assets, an investment in a “pure play” that HIVE represents would be a viable way to get into the crypto “game.”

Conclusion

One of the main reasons I wrote this article was as a caveat emptor regarding the perils and pitfalls of cryptocurrency investing. I believe the inherent volatility of the industry is reason enough that most investors should allocate no more than 0.005% to this space. I also believe that the hoopla from the emergence of The Libra Association will have the strength of a grade N52 neodymium magnet and expand the cryptocurrency market exponentially. For people who may want to consider a nano-cap stock, I believe that HIVE would be worthy of consideration for the reasons detailed in this article. For more information and to register to HIVE’s mailing list, HIVE’s website is www.HIVEblockchain.com. You can also follow @HIVEblockchain on Twitter and subscribe to HIVE’s YouTube channel.

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Best of investment success to all!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.





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