Cryptocurrencies have experienced a resurgence in 2019 after Crypto Winter (an extended bear market) gripped the asset class during the latter part of 2018.
Bitcoin is up nearly 150% year-to-date and other major cryptocurrencies have followed along. At Capital 10X we believe that cryptocurrencies, specifically bitcoin (BTC), can act as a strong hedge to the overall markets. Bitcoin has serious potential as a store of value and as a medium of exchange. Check out our deep-dive on Bitcoin on Grizzle to learn more.
In our opinion, the best way to invest in the potential of bitcoin and other digital assets is to own those assets directly. Despite the fact that buying and holding or trading cryptocurrencies can be done in 4 easy steps, we understand that some investors prefer to keep their investments in public markets.
While we were aware of a few higher-profile companies who had business models tied to bitcoin, we consulted our friends out on Twitter for some more names (feel free to send us more suggestions in the comments too).
For the most part I’m very underwhelmed with what options I have to play equity markets for leverage/exposure to $BTC
Still think it’s a worthwhile exercise to map out all the plays and slap on a @capital10x 5-star rating
Hit me with tickers ( $BTC exposure not shitcoins)🧐
We received plenty of great suggestions and after looking at the options available we settled on a few simple criteria to keep our research focused:
Main focus of the company must be cryptocurrency related. This left out a few names such as Overstock (OSTK), JP Morgan (JPM), and more recently Facebook (FB), which all have crypto related businesses that are still secondary to their primary business model.
The company must be listed on North American markets and available to non-accredited investors. While there are bitcoin and ethereum ETNs listed on the Nasdaq Stockholm exchange and a bitcoin mutual fund for accredited investors in Canada, those aren’t available to the average investor through their brokerage.
Companies with greater exposure to bitcoin were favoured. We believe bitcoin is the best in breed of the many cryptocurrencies and although some altcoins may survive in the long run, there is more risk in building a business around them.
Without further ado, below are the companies we took a look at, sorted from best to worst, and their market cap. Also, don’t miss our deeper look at the best bets below the infographic.
Infographic Screen Reader
Public Stocks with Exposure to Bitcoin
While we still believe that owning Bitcoin directly is the best way to invest in the digital currency revolution, we recognize that some people prefer investing in public markets. We scoured the North American public markets for any publicly traded stocks which would provide investors some exposure to Bitcoin (BTC) or other cryptocurrencies, here’s what we found:
The Best Bets – Stocks with Reasonable Direct or Indirect Exposure to BTC
Grayscale Investments, LLC (OTCMKTS: GBTC)
Market Cap: $2.24B (USD)
Last Reported Earnings Date (Period Ending): N/A (N/A)
Last Reported Crypto Related Revenue (Annualized): N/A
Cash Remaining at End of Period: N/A
Company Description: Grayscale operates a Bitcoin trust which buys and sells baskets of BTC. While direct access to the trust is limited to accredited investors and only open from time to time, shares in the trust can be bought OTC, are fairly well traded (5 million daily average volume) and track the price of BTC less fees and expenses.
Company Focus: Investing
Bitcoin Exposure: High
Hut 8 Mining Corp. (TSXV: HUT, OTCMKTS: HUTMF)
Market Cap: $246M (CAD)
Last Reported Earnings Date (Period Ending): 5/29/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $48,408,056
Cash Remaining at End of Period: $3,133,006
Company Description: Hut 8 has Bitcoin mining operations in partnership with BitFury in 2 locations in Alberta, Canada and mined 2405 BTC in Q1 2019. Based on the nature of their operations and the amount of BTC on their books, there is exposure to BTC but questions remain on its longer-term profitability as a company.
Last Reported Earnings Date (Period Ending): 3/1/2019 (12/31/2019)
Last Reported Crypto Related Revenue (Annualized): $33,798,180
Cash Remaining at End of Period: $6,315,591
Company Description: Hive primarily operates GPU based mining operations in several Scandinavian locations which mine Ethereum (ETH) but are also involved in cloud mining of BTC. The company recently partnered with London based Argo (LSE: ARB) which will further increase their BTC exposure. Hive has been losing money but is still accumulating digital currencies.
Company Focus: Mining
Bitcoin Exposure: Medium
Galaxy Digital Holdings Ltd. (TSXV: GLXY, OTCMKTS: BRPHF)
Market Cap: $138M (CAD)
Last Reported Earnings Date (Period Ending): 5/29/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $81,225,576
Cash Remaining at End of Period: $29,869,182
Company Description: Galaxy was founded by ex-Goldman partner, Mike Novogratz and provides institutional level merchant banking in the crypto ecosystem. The firm is exposed to the broader crypto markets but does have some exposure to BTC through investments, trading and asset management. Galaxy lost $270M in 2018 but still has significant cash backing.
Company Focus: Banking, Investing, Advisory
Bitcoin Exposure: Medium
Riot Blockchain Inc. (NASDAQ: RIOT)
Market Cap: $41.5M (USD)
Last Reported Earnings Date (Period Ending): 5/10/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $5,721,040
Cash Remaining at End of Period: $1,016,019
Company Description: Riot mines BTC, BCH and LTC and is also an investor in Canadian crypto exchange CoinSquare. While the relatively small mining operations are currently the only revenue source for the company, they are also working on developing their own U.S. based crypto exchange. With a low cash position at the moment, Riot has been selling their mined crypto and releasing convertible notes to fund operations.
Company Focus: Mining, Exchanges
Bitcoin Exposure: Medium
The Also Rans – Stocks with Some Exposure to Cryptocurrencies but Little Exposure to BTC
Interbit (TSXV: IBIT, OTCMKTS: BTLLF)
Market Cap: $11.5M (CAD)
Last Reported Earnings Date (Period Ending): 5/31/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $-
Cash Remaining at End of Period: $9,640,608
Company Description: Interbit is in the process of developing a private blockchain system which they hope will allow enterprises to develop their own blockchain applications. With no revenues at all in Q1 2019, the company has a bit over a year of runway with their current cash to find a commercial application for their in-development system.
Company Focus: Blockchain Development
Bitcoin Exposure: None
Hashchain Technology Inc. (TSXV: KASH, OTCMKTS: HSSHF)
HALTED
Market Cap: $7.8M (CAD)
Last Reported Earnings Date (Period Ending): 4/26/2019 (2/28/2019)
Last Reported Crypto Related Revenue (Annualized): $8,016,268
Cash Remaining at End of Period: $171,569
Company Description: Hashchain is a BTC and DASH mining operation at two facilities in Buffalo, NY. The company announced in March 2019 that they have agreed to a reverse takeover from private hosting company, Digihost as they were not able to profitably mine coins due to hosting costs. The stock has been halted pending the completion of the transaction which is now forecast for the end of June 2019.
Company Focus: Mining
Bitcoin Exposure: Medium
Big Blockchain Intelligence Group Inc. (CSE: BIGG, OTCMKTS: BBKCF)
Market Cap: $10.6M (CAD)
Last Reported Earnings Date (Period Ending): 5/30/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $126,040
Cash Remaining at End of Period: $10,334,694
Company Description: BIG Blockchain began as a services firm providing forensic blockchain investigation as well as Anti-Money-Laundering (AML), Know-Your-Customer (KYC) and other compliance services. However, the company recently expanded their services by acquiring Netcoins (CSE: NETC) bitcoin retail locations, OTC trading and custody services. BIG reported very small revenues in Q1 2019 but do still have a good amount of cash on hand.
Company Focus: Analysis, Regulatory Compliance, Trading
Last Reported Earnings Date (Period Ending): 4/26/2019 (2/28/2019)
Last Reported Crypto Related Revenue (Annualized): $129,836
Cash Remaining at End of Period: $726,289
Company Description: Neptune operates DASH masternodes to validate DASH blockchain transactions. The company also holds a small basket of other cryptocurrencies including BTC, ETH, LTC and others. DASH is a transactional focused cryptocurrency which is designed to allow fast, low-cost transactions. Neptune has seen reducing revenues over the past several quarters and does not have significant cash backing remaining based on their last released earnings.
Company Focus: Mining
Bitcoin Exposure: Low
The Scrap Heap – Stocks with Shaky Financials and/or Business Models with Little Exposure to BTC
Blockchain Industries (OTCMKTS: BCII)
Market Cap: $90.3M (USD)
Last Reported Earnings Date (Period Ending): 10/29/2018 (4/30/2018)
Last Reported Crypto Related Revenue (Annualized): $1,582,483
Cash Remaining at End of Period: $518,960
Company Description: Blockchain Industries invests in early stage blockchain and crypto projects and provides consulting services in the industry. The company has not disclosed financial results since the period ending April 2018. The latest news on the company was an announcement of a merger with Singapore based BTHMB Holdings in January 2019. Details on the terms of the merger have yet to be announced.
Company Focus: Investing, Advisory
Bitcoin Exposure: Unclear
TruTrace Technologies Inc. (CSE: TTT, OTCMKTS: BKKSF)
Market Cap: $21.2M (CAD)
Last Reported Earnings Date (Period Ending): 3/25/2019 (1/31/2019)
Last Reported Crypto Related Revenue (Annualized): $-
Cash Remaining at End of Period: $2,526,316
Company Description: TruTrace has developed a blockchain based platform for tracking the provenance and intellectual property for cannabis. The company has yet to record any revenues for their product but has sufficient cash to continue operating for about a year based on their last released financials. The company very recently moved its listing from the TSXV to the CSE in order to explore opportunities in the US cannabis market. The private blockchain application has no exposure to public cryptocurrencies such as BTC.
Last Reported Earnings Date (Period Ending): 5/30/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $8,146,068
Cash Remaining at End of Period: $2,195,766
Company Description: DMG has a small BTC mining operation and gains revenues from setup and hosting fees of mining equipment for clients. The firm has been under a cease trading order from regulators since Feb 1, 2019 due to their inability to file annual earnings report. As of May 13, the company released their earnings and requested the cease trading be lifted and have since also released Q1 2019 earnings but nonetheless the stock remains halted.
Company Focus: Mining
Bitcoin Exposure: Medium
Metaverse Capital Corp. (CSE: FORK, OTCMKTS: GBCHF)
Market Cap: $15.4M (CAD)
Last Reported Earnings Date (Period Ending): 4/1/2019 (1/31/2019)
Last Reported Crypto Related Revenue (Annualized): $1,930,668
Cash Remaining at End of Period: $87,278
Company Description: Metaverse is a diversified company who had been mining BTC but has switched to operating nodes for DASH, LOKI and other crypto assets. The company also invests/advises other cryptocurrency related projects. The company had very little cash remaining at its last earnings but given the change in focus as well as several announced partnerships since then it remains to be seen how the company will perform going forward.
Company Focus: Investing, Mining, Advisory
Bitcoin Exposure: Low
Codebase Ventures Inc. (CSE: CODE, OTCMKTS: BKLLF)
Market Cap: $7.8M (CAD)
Last Reported Earnings Date (Period Ending): 4/1/2019 (1/31/2019)
Last Reported Crypto Related Revenue (Annualized): $-
Cash Remaining at End of Period: $930,247
Company Description: Codebase previously focused on investing in blockchain specific early stage opportunities but has since broadened their focus to include other technology and cannabis-related businesses. The company did not record any revenues in 2018 or Q1 2019 and has about a years worth of cash remaining on hand at previous burn rates.
Company Focus: Investing
Bitcoin Exposure: Low
Block One Capital Inc. (TSXV: BLOK, OTCMKTS: BKPPF)
Market Cap: $5.0M (CAD)
Last Reported Earnings Date (Period Ending): 4/29/2019 (2/28/2019)
Last Reported Crypto Related Revenue (Annualized): $88,648
Cash Remaining at End of Period: $1,182,697
Company Description: Block One Capital is a small investment company and is not affiliated with Block.one the company behind EOS. Block One’s website describes them as investors in early stage blockchain and crypto startups, but based on the most recent financials, they hold very few blockchain related positions. The companies largest blockchain related investment is in Hashchain (KASH) but it comprises less than 10% of its portfolio.
Company Focus: Investing
Bitcoin Exposure: Low
Hyperblock Inc. (CSE: HYPR, OTCMKTS: HYBOF)
HALTED
Market Cap: $6.1M (CAD)
Last Reported Earnings Date (Period Ending): 11/29/2018 (9/30/2018)
Last Reported Crypto Related Revenue (Annualized): $20,128,308
Cash Remaining at End of Period: $782,725
Company Description: HyperBlock operates mining facilities in Canada and the US as well as providing Mining as a Service, hosted mining and server sales. The company last reported earnings some time ago and is currently under a cease trading order until they release their annual earnings for 2018. The latest from the company is that they do not expect to release earnings until July 31, 2019.
Company Focus: Mining
Bitcoin Exposure: Unclear
Coin Hodl (TSXV: COIN, OTCMKTS: MXRSF)
Market Cap: $2.3M (CAD)
Last Reported Earnings Date (Period Ending): 5/28/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $-
Cash Remaining at End of Period: $2,633,293
Company Description: Coin Hodl was once focused on investing in major cryptocurrencies but as of their March 2019 have decided to divest all its digital currency assets and shift the business focus to actively pursuing new
investment opportunities outside the sectors of digital currency and blockchain.
Company Focus: N/A
Bitcoin Exposure: None
TimefireVR Inc. (OTCMKTS: TFVR)
Market Cap: $1.3M (USD)
Last Reported Earnings Date (Period Ending): 5/15/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $4,813
Cash Remaining at End of Period: $8,920
Company Description: TimefireVR is a virtual reality company who got involved in cryptocurrency by purchasing ETH in January 2018 and mining small amounts of BTC. However, in May of 2019 they acquired Red Cat and intend to change the focus of the overall company from virtual reality and cryptocurrency to cloud-based analytics, storage and services for drones.
Company Focus: N/A
Bitcoin Exposure: None
Blok Technologies, Inc. (CSE: BLK, OTCMKTS: BLPFF)
Market Cap: $0.9M (CAD)
Last Reported Earnings Date (Period Ending): 5/30/2019 (3/31/2019)
Last Reported Crypto Related Revenue (Annualized): $-
Cash Remaining at End of Period: $14,266
Company Description: BLOK Technologies is another investment company focused on blockchain and emerging technology. The company has yet to book any revenues and has very little cash remaining at the end of the last quarter.
Company Focus: Investing
Bitcoin Exposure: Low
Note: Market Caps are from end of day 6/20/2019
Sources: SEDAR/EDGAR Filings, Company Websites, Yahoo Finance
A Deeper Look at the Best Bets
What became clear to us very quickly is that there are a very small number of ways to invest in public market equities that have legitimate businesses meeting our criteria. The clear winner in our analysis was the Grayscale Bitcoin Trust (GBTC). Not only does it have significant assets under management of over $2B USD, but it’s well traded even though it’s only available on OTC markets and is highly correlated to bitcoin. It is essentially a publicly traded proxy for bitcoin.
The next set of businesses with potential to ride the cryptocurrency wave were focused primarily on mining with Hut 8, Hive, and Riot. Hut 8 is the one company who is exclusively focused on mining BTC, but over the past several quarters they have really struggled to be profitable. They have yet to report earnings during the most recent bitcoin bull run so the next earnings report will tell investors whether they can turn the profitability corner as the hash rate for BTC increases.
Hive and Riot mine other cryptocurrencies in addition to BTC and have also struggled to show consistent profitability. Galaxy, however, is a different beast altogether, originally envisioned as the Goldman Sachs of crypto, it has also shown huge losses but it backstopped by the deep pockets of its founder Mike Novogratz.
To see how well these assets tracked the price of BTC we looked at how these companies’ share prices correlated to bitcoin over the course of this year so far, again GBTC was the clear winner.
Company (Ticker)
Correlation to BTC YTD
Grayscale Bitcoin Trust (GBTC)
99.1%
Hut 8 Mining (HUT.V)
73.5%
HIVE Blockchain (HIVE.V)
42.7%
Galaxy Digital Holdings (GLXY.V)
37.5%
Riot Blockchain (RIOT)
30.3%
Note: Correlation calculated 7 days/week with GBTC and RIOT correlated to BTC-USD and HUT, HIVE and GLXY correlated to BTC-CAD; stocks assumed flat on non-trading days. Source Data: Yahoo Finance
While correlation to bitcoin is certainly important based on the long-term potential of BTC, we also looked at the overall returns of these different investments. Again bitcoin and the Grayscale trust have performed much better YTD with GBTC actually outperforming BTC (175% vs ~150%). All of the other best bet stocks we looked at showed much lower performance over the year ranging from ~50-85%.
YTD Performance BTC and Publicly Traded Crypto Companies
Source: Yahoo Finance
Reference Links
To help facilitate your own due diligence on these companies we’ve compiled links to their website and securities filings below:
In the interest of full disclosure, Capital 10X employees’ own shares in Hut 8, the Grayscale Bitcoin Trust as well as small amounts of Bitcoin and Ethereum. More information on the profiled companies can be found by reviewing public filings on SEDAR at www.sedar.com and the SEC at www.sec.gov. Writers at Capital10X.com are not certified financial analysts or licensed in the securities industry in any manner and the content of this report may not be complete, accurate or current.
