Blockchain technology is rapidly increasing in popularity. However, many people seem to be confused about what investing in blockchain means. Is buying cryptocurrency enough? Or should we focus on direct investment in companies developing blockchain technology?
Ultimately, blockchain investors fall into one of two categories; investing in crypto stocks or publicly traded companies.
The market currently stands at a $500 billion market valuation but $160 billion of that is tied to currency alone in which users are speculating to make money on a rise in the value of the currency.
This leaves the business model portion at $340 billion which is currently the most attractive area for investment.
Blockchain stocks tend to focus on the currency aspect of blockchain.
Most cryptocurrencies have some sort of volatility in price which allows investors to make money if they make a correct prediction on their price movement.
Investors can buy stocks in companies that are developing blockchain services, or even monetizing their blockchain.
Of course, there is also the possibility of both, making money off of the price movement of cryptocurrency and the development of blockchain services.
The first question to ask oneself is do they want to invest in a currency or a business model? If they choose the latter, which business model appeals to them the most? Then they can take the next step of asking themselves “is there evidence that this business model is profitable?” If the answer is a yes, then they can finally start looking into which crypto-currencies or tokens are involved and if the blockchain technology is smart enough to cut out the middleman.
Table of Contents
What is Blockchain?
The blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.
Without blockchain, the process of making a digital transfer of value can be simplified, but the transfer is less likely to be secure and is more likely to be fraudulent. Blockchain overcomes this security concern by providing a decentralized way to verify and transmit information.
This is achieved by maintaining a distributed network that replicates and saves data in a decentralized manner. Whereas conventional databases use a centralized approach to store data, a blockchain uses a decentralized approach.
A blockchain is a distributed database, replicated across multiple nodes. The nodes are computers connected over a network. When changes are made to the data stored on a blockchain, the nodes must concur on the changes, and only once the parties agree can the change be validated.
There are four important elements of the blockchain technology:
A chain of digital records (blocks), which are linked and secured using cryptography. Each block contains a cryptographic hash of the previous block and transaction data. Each block is linked to other blocks. A block can be added to the chain only after the cryptographic hash of the new block is calculated and verified by the network.
Companies Utilizing Blockchain Technology
Blockchain’s potential is no longer the startup industry’s best-kept secret. Currently making impressive inroads on Wall Street, blockchain technology is being embraced by some of the most prominent titans of industry.
With all of the hype around the crypto market, many of us have forgotten about the second option; the stock market, and there are some really promising companies that we should all be looking into.
If you are looking for companies that are looking to invest in blockchain technology and are seeking to make a profit from it, look no further than the stock market.
Coinbase Global Inc. (COIN)
Coinbase, COIN Stock, began trading on April 14th, 2021, and fell almost immediately. Investors and analysts have varying opinions on which cryptocurrencies will become the world’s preferred digital currencies, which companies will successfully build the metaverse, or what the long-term growth prospects for the crypto economy are. However, Coinbase, the leading cryptocurrency exchange, may benefit from all three of these trends. CFRA analyst David Holt believes that given the company’s long-term growth forecast for the crypto economy, as well as its diverse array of financial products, investors might be able to exceed their high expectations for the company.
Nvidia Corp. (NVDA)
Nvidia is a company that designs and produces high-end graphics cards and processing chips. These products are used by customers in the gaming industry, cloud computing, and artificial intelligence markets. Nvidia has also made consumer products such as the Shield Android console, tablets, and the Nvidia Spot drone. According to Vivek Arya, an analyst at Bank of America, Nvidia will be a central player in powering the metaverse. It also has specialized chips designed specifically for cryptocurrency mining, providing additional exposure to blockchain technology.
At its analyst day event, Nvidia announced that it’s planning on making up to $30 billion through GPU sales in 2023. This would be a 17% year-on-year growth from 2020 revenue of approximately $25 billion, which is an impressive growth number in this market. The revenue for 2019 is expected to be between $20 billion and $22 billion.
Now the question here is how does the current cycle help Nvidia’s expansion into Blockchain?
Let’s break down the reasons for each market growth individually:
GPUs are getting bigger and more popular across all application spaces like artificial intelligence, machine learning, etc. The new architecture will help meet demand.
Such is the level of consumer demand for GPUs that retailers and distributors are reporting tight supply conditions with many having to turn away orders due to lack of stock availability. This shortage is most likely due to a ramp-up at Nvidia’s manufacturing facilities driven by robust demand forecasts and continued shortages of critical components throughout 2019 resulting from supply chain disruption triggered by the earthquake and tsunami in Japan.
Cryptocurrencies have been affected by the bear market since late 2018 with some coins seeing as much as a 99% loss in value over the past 12 months. However, even with this bear market, cryptocurrency miners have been buying graphics cards left, right, and center with many expecting a revival of the crypto space once it begins its recovery.
PayPal Holdings Inc. (PYPL)
Digital payments company PayPal is fully embracing cryptocurrency and blockchain technology. Users can now buy and sell crypto in their PayPal accounts, making it a lot easier for people who don’t have crypto wallets to use a lot of popular crypto services.
The company is reportedly also exploring the launch of a stable coin that would be backed by the U.S. dollar. A stable coin tied to the U.S. dollar could prove more useful than most cryptocurrencies as it doesn’t suffer from price volatility — one of the main reasons people don’t use digital currencies to pay for online purchases or invest in projects on crowdfunding platforms like Kickstarter and GoFundMe.
A stablecoin that was tied to USD would make it easier for merchants and consumers to use PayPal, as the value of their transactions won’t go up dramatically due to currency fluctuations or wild moves in the market. This would allow PayPal to capitalize on some of the advantages of cryptocurrencies without many of the disadvantages for their users, particularly those who aren’t already well-versed in buying and selling crypto or managing their wallets.
This comes on the heels of news that Coinbase is developing its stablecoin that will be backed by US dollars as well as other assets later on like Bitcoin, Ethereum, and Litecoin.
Accenture PLC (ACN)
Accenture has one of the most attractive portfolios of services for businesses. The consulting, technology, and other services they provide are vital to the growth and success of many of the biggest firms in the world.
The company has an established record of growing earnings at above-average rates, which gives investors confidence in its momentum. Their services give them an advantage in their space and help them stand out from their competition. Accenture is expected to expand its client base and keep expanding its market share over time.
“Diversified firms benefit from revenue stream diversification, which increases revenue stability,” according to a page on Goldman’s website dedicated to its view on Accenture. “Accenture’s business strategy includes supplying technology infrastructure services (44% of revenue), professional services (31%), and digital technology & cloud-based services (23%). Within non-traditional infrastructure services, Accenture leads in cloud infrastructure, public cloud platform delivery, and security, and is also a leader in application development & integration.”
The company has reported strong financial results in recent quarters and is expected to introduce innovations that will fuel earnings over the next few years. Goldman Sachs expects Accenture’s average annual earnings growth rate over the next five years to be 15%.
International Business Machines Corp. (IBM)
An enterprise technology leader, IBM has struggled to update its legacy business model and generate consistent growth, but recent investments in blockchain technology could play a significant role in the company’s future. IBM Blockchain provides services that improve security and transparency for supply chains, international payments, global trade, and food supply. Analyst Wamsi Mohan from Bank of America says IBM has bullish catalysts in 2022, including consulting revenue growth and new server system launches. In the longer term, Mohan is optimistic about IBM’s cloud and artificial intelligence initiatives.
Enterprises are now adopting blockchain to overcome challenges such as improving traceability for complex supply chains. Corporations use private blockchain networks to create common systems that improve trust between organizations by providing an immutable audit trail of transactions. Currently, over 200 financial institutions collaborate through an IBM-led consortium called Hyperledger Fabric. Over 80 governments and NGOs also participate in the World Food Program’s project to simplify the tracking of food donations.
The analyst said that with a series of recent developments, “the company’s blockchain initiatives have advanced significantly.” By using alternative data sources from its partnerships with companies such as Daimler AG, FedEx, and Maersk, among others, the firm has been able to make several improvements to its blockchain platform — including securing a 40 percent greater performance gain on its network. The platform currently processes more than 6 million transactions per day.
In addition, Mohan notes that IDC predicts over 70 percent of all interactions within B2B eCommerce will be influenced by blockchain technology by 2022. Overall, he maintains an Outperform rating on IBM with a $150 price target.
After taking a beat pill earlier this year — the company repurchased $5 billion worth of stock in 2019 — IBM this month announced another round of buybacks worth up to $15 billion over two years. It’s time to freshen up!
Advanced Micro Devices Inc. (AMD)
Semiconductor company Advanced Micro Devices is developing GPU and CPU technologies that can enhance the speed and security of blockchain transactions while improving the overall ecosystem. The company has worked on developing a wide variety of use cases and combining various technologies to create the first-ever multiple blockchain processing platforms. Advanced Micro Devices’ GPUs are gaining market share in the data center, and its entire portfolio of next-generation GPUs will expand margins while increasing profitability.
DocuSign Inc. (DOCU)
DocuSign is the leading provider of electronic signature software. The company helped create one of the first public prototypes of an Ethereum blockchain-based smart contract in 2015. Morningstar analyst Dan Romanoff says DocuSign has several long-term growth opportunities, including additional customer adoption, expanding use cases, and a shift to the Agreement Cloud platform. After seeing its stock plummet more than 50% following a third-quarter billings miss in December, DocuSign’s overall results were “generally solid,” and its revenue of $398 million was mostly in line with expectations.
CME Group (CME)
CME Group, the world’s largest futures and options exchange, offers crypto futures contracts off of its CME GLOBEX® platform on behalf of its clients. The company also offers traditional equity, commodities, and currency futures contracts, but generates the bulk of its revenue through a small fee charged to execute each transaction. By October 19, 2018, the company had crossed the 5 million mark in trading volume for its cryptocurrency futures products on CME, which makes it an incredibly successful product launched just months before in December 2017.
Last week marked one year from when Bitcoin futures were first launched by CME Group, and since then the futures market has seen the most trading volume by a huge margin relative to any of the other crypto-related offerings on its platform. If the trend continues, these contracts will continue to be a feature of CME Group’s platform as more people enter the market and desire exposure to their crypto assets in a regulated US marketplace.
GlobalX Blockchain ETF (BKCH)
The GlobalX Blockchain ETF (BKCH) is an exchange-traded fund that gives investors access to an entire basket of blockchain stocks with a single investment. The fund was launched in 2021 and has an expense ratio (annual investment fee) of 0.50%. Here are the components in the basket:
The GlobalX Blockchain ETF has a decent weighting in the top eight blockchain stocks by market cap, including almost 20% in top-two stock Iota and about 10% in big bank Fidelity. In short, if you’re bullish on the long-term potential of blockchain technology but don’t want to try to pick the winners in the space, this ETF could be right for you.
There are several ways Amazon (NASDAQ: AMZN) could deploy blockchain in its business., Amazon could decide to integrate blockchain into its e-commerce platform. This would make it much easier for companies to track the goods being shipped. Amazon also offers Managed Blockchain Services and Amazon Web Services. The AWS platform enables customers to create and manage their blockchain networks.
Drastically reducing costs will probably be the biggest benefit of using blockchain technology, but as the technology becomes more prevalent and accepted, it’s easy to see a world in which Amazon leverages blockchain as a way to collect information on consumer preferences. All this data could provide a valuable edge over the competition and help Amazon deliver a better product.
There’s definite potential for Amazon to someday incorporate blockchain technology into its massive e-commerce platform, but there is still much work needed to make that happen.
Mastercard and the payments sector are growing quickly. Merchants are becoming more cashless, people are paying their bills through apps, and even though there have been some problems with chip and pin or card fraud, in general, it’s quick and easy for people to pay for things using their debit cards. The industry does have some problems with cross-border money transfers — they’re slow and costly because of currency exchange fees and other issues. Blockchain technology has the potential to solve these problems.
Mastercard announced a partnership with R3, a company that builds on blockchain technology to create a cross-border payment system. This would allow Mastercard to fix some of the payments sector’s biggest problems. Other companies like Visa and AMEX are also working with R3 on similar solutions.
Block (NYSE: SQ) is a blockchain stock in two main ways. Most obviously, it allows you to buy and sell bitcoin quickly and easily through its Cash App. It also has a team of bitcoin developers, known as Square Crypto, that has several exciting projects. Its name change is indicative of its shift toward blockchain technology solutions.
Best Crypto Stocks
Cryptocurrency is digital money that isn’t managed by a central government. Instead, it’s based on blockchain technology, with Bitcoin being the most popular of them all. There are almost 8,900 cryptocurrencies listed on CoinMarketCap as of December 15th, 2018, though many of them aren’t worth investing in, these cryptocurrency stocks below are worth looking into if you plan to invest in cryptocurrency for the first time or for a long time.
Bitcoin is the most popular cryptocurrency. Over the past two years, its value has increased more than 500%, partly because of its increased acceptance by companies like Microsoft and Steam. It’s also gotten easier to buy bitcoin, as companies like Coinbase simplify the process.
Despite the weak start, Bitcoin has been growing gradually in the past few years. According to experts, its popularity will continue to grow in the next decade and could potentially reach a value of $500,000 within the next 10 years. A lot of investors and digital enthusiasts believe that Bitcoin will play a major role in the future.
A lot of businesses already accept payments in the form of bitcoin. Visa has adopted it into their payment system. Additionally, Tesla announced its $1.5 billion investment in it, and for a time, the company accepted it as payment for its cars. Meanwhile, larger banks are beginning to incorporate bitcoin transactions into their offerings.
The value of bitcoin tends to fluctuate a lot. You may see the price go up or down thousands of dollars during any month. If you’re nervous about such drastic swings, invest in cryptocurrency with caution. But if you’re okay with that, there are still many reasons to invest in bitcoin over other cryptocurrencies — provided you can afford to buy one whole unit at nearly $40,000 per coin. (If not, I recommend sticking to companies who accept smaller amounts.)
Other reasons to invest in bitcoin are its technological innovation and the number of people who use it. As one of the first cryptocurrencies and the most popular around the world today, it has a ton of momentum behind it. Better yet, even if you don’t have millions of dollars to buy coins right now, most bitcoin exchanges let people pay using dozens of smaller denominations (like US dollars). This makes even small amounts viable investments. And finally, whether you’re looking at the big picture or something more focused on business demand, crypto is expected to play a huge role in society because of its innovative technology and wide user base. (For one thing, it allows miners and suppliers to transfer money without relying on banks.)
Ether is the cryptocurrency that powers the Ethereum blockchain and it’s the second-largest digital currency in the world. It ranks second highest in terms of market capitalization and has the second-highest trading volume. It’s also the highest-grossing cryptocurrency, with a market cap of about $64 billion.
What’s interesting is that Ethereum’s price has remained relatively steady, even as the cryptocurrency market has crashed.
Ethereum differs from Bitcoin because it isn’t just a cryptocurrency but also a blockchain platform for developers to create their crypto. It’s far ahead of other blockchain platforms in value and popularity, but behind bitcoin in terms of price.
Ethereum is making some moves to be more competitive going forward. The recent release of Ethereum 2.0 is a big step in that direction. Though it’s not done yet, they are aiming to offer much faster transaction speeds and lower transaction fees. This would certainly help make Ethereum more competitive going forward, but it’s still a major challenge.
Binance Coin (BNB)
Binance coin is the second-largest cryptocurrency in the world by market cap. It is also the most popular cryptocurrency trading exchange, which makes it a more stable investment option than many others on the market.
While the Binance coin’s commitment to developing a secure blockchain network has won over many critics, some investors are wary of its potential security issues as it remains one of the more volatile coins on the cryptocurrency exchange.
Last year, Cardano made a big upgrade to its platform by introducing smart contracts. This year, the company has announced more upgrades that will enable even more functionality. Smart contract deployment will make it easier for developers to build on the network.
The Cardano network is less energy-intensive than other networks, like Bitcoin’s large network. This makes transactions faster — and cheaper — than other cryptocurrencies. Cardano is also more adaptable and more secure than other cryptocurrency networks. The company consistently makes improvements to ensure that it stays ahead of hackers.
Though these upgrades give Cardano an important edge, it may be difficult for the platform to compete with the likes of Bitcoin and Ethereum. There are fewer users on the platform, which means fewer people can take advantage of these upgrades. Most cryptocurrency investors won’t be interested in investing in a project that doesn’t have a lot of adoption on its network.
Polygon is a blockchain platform designed to improve Ethereum scaling and infrastructure development. It launched in early 2020. A “layer two” solution, Polygon expands Ethereum into a multi-chain system to improve transaction and verification speed. The cryptocurrency exchange Binance and Coinbase exchange are among Polygon’s investors. Polygon has its token, MATIC, which can be used for payment services, transaction fees, and as a settlement currency on the platform. There is a slight chance of someone cracking the code, but we’re confident it won’t happen because Polygon has had all its vulnerabilities patched up real fast.
Solana, one of the fastest-growing cryptocurrencies, saw its value skyrocket after CoinMarketCap removed Facebook’s Libra from its list of cryptocurrencies. According to CoinMarketCap, Libra had a $2.1 billion market cap and was sitting at the eighth spot — right between Ethereum and Solana — when it was removed. The price of Solana surged, as a result, jumping more than 15% overnight.
The price of Solana has also been pushed up by enthusiasm for its tech and its potential usefulness. “The team has been working on what is arguably one of the fastest blockchains in existence,” Matthew Roszak, a co-founder of Bloq and Tally Capital, told Forbes in February. However, reliability issues have exposed the fact that Solana’s technology is still far from mature. On March 28, Solana suffered from a “resource exhaustion” outage, according to Bloomberg and CNBC. Cloudflare said that it happened at around 9:00 p.m., leading to about a 20-minute outage of Solana nodes.
One hope is that scalability will be addressed in future versions of Solana’s software, enabling it to support larger amounts of transaction volume. Right now, up to 64 transactions per second (TPS) can be processed by a single Solana node, which some see as an issue compared to Ethereum’s throughput of around 10,000 TPS and bitcoin’s no less than approximately three-to-four transactions per second right now.
However, believers in Solana believe its technology has the potential to become more competitive with existing blockchain networks like Ethereum and Bitcoin in the future.
Avalanche is a new blockchain that’s much faster — as fast as 6,500 transactions per second — than Ethereum. The cryptocurrency is designed to improve the base protocol to make it more scalable while still providing decentralization. And even though its network is still relatively new, it’s already popular among many Ethereum projects.
According to AVAX’s website, they are aiming to be the most scalable blockchain throughout history. They aim to achieve this by having 3 independent blocks that can validate independently. This makes their scaling greater than Ethereum which has a single blockchain and is not able to scale as fast as AVAX. According to US News, Avalanche is slowly becoming more popular among Ethereum Projects. U.S News also does acknowledge that Avalanche doesn’t have an actual track record yet because of how little time it has been launched for. However, these same people also noted that Avalanche can be a worthwhile investment due to its true scalability.
Right now AVAX is being traded on many exchanges such as Binance and Huobi Pro with a current trading price of $74.20 (9/5/2019).
This change would summarize that I changed the fact that Avalanche claims to have 6,500 transactions per second since AVAX doesn’t have any recorded data due to only just launching in 2020. In addition, the Introduction was changed to fit better with the rest of the paragraph and include information about Avalanche becoming more common amongst Ethereum projects.
The asset tracking system Chainlink is a decentralized oracle network used by various cryptocurrency projects such as 0x, Augur, and Golem to link them to the world outside their blockchain and perform the functions they promise — for example, a decentralized exchange that can place trades on your portfolio without custody. That means the blockchain can make secure transactions with external data feeds, such as Google Cloud. Benzinga reported that Google uses Chainlink’s protocol to connect users to its cloud services.
Despite its utility and support, the price of Chainlink has rocked with the same volatility affecting crypto assets since it started trading early last year; this fall was driven by a genuine drop in interest after a massive spike during February following its listing on Coinbase (and then relatively flat performance).
The Future of Blockchain Investing
Blockchain is a transformative technology with an enormous amount of potential. It’s still in its early days in the crypto world, but many companies are already exploring new ways of using blockchain and even more, possibilities are emerging daily.
These two areas of investing have only begun to be exposed to the public and are slowly gaining traction, however, the future of investing in blockchain is evolving.
Security tokens represent the next wave of investing in the blockchain ecosystem. The problem with the current method of investing in blockchain is that investors are limited to the platform that the companies utilize.
As you decide which cryptocurrency is the best investment for you, here are some other things to keep in mind:
- The speed at which transactions are completed
- The fees associated with transacting
- The ability to use your crypto exchange for regular purchases and bank transfers
Regardless of your choice to invest in the crypto ecosystem or purchase stocks in one of the companies taking advantage of the blockchain network you want to be certain to do your research before committing to any investment.