Canadian blockchain stocks have been decided losers in 2019.
It’s been a while since the hype died down on blockchain but it really wasn’t that long ago when the distributed ledger tech was the talk of the town and investment banks were falling over each other to back almost anything with cryptocurrency or blockchain in the title.
Blockchain was said to be revolutionary of a scale and reach similar to the World Wide Web and with implications running beyond finance into insurance, supply chain management, real estate, health care.
You name it.
Canadian blockchain stocks under the gun: “Despite billions of dollars of investment, and nearly as many headlines, evidence for a practical scalable use for blockchain is thin on the ground.”
But while all of that may still be on the table in some shape or form, the enthusiasm for Canadian blockchain stocks has decidedly waned, in no small part due to the lack of evidence of blockchain’s successful application, now a number of years into its emergence on the world stage.
International consulting firm McKinsey and Co, whose report, Blockchain’s Occam Problem, concluded that for all its promise, blockchain has proven to be an expensive, unwieldy under-achiever, that “despite billions of dollars of investment, and nearly as many headlines, evidence for a practical scalable use for blockchain is thin on the ground.”
The final verdict is still out, of course, which means that there’s still hope for blockchain and its backers. And with Bitcoin’s rise back above $10,000 this summer, there’s renewed interest in cryptocurrencies and a growing sense that the cryptos — at least some of them — are here to stay.
To that end, here are three names in the blockchain/cryptocurrency space that may deserve not only a second look from investors but perhaps a round of applause for their tenacity during tough times.
NetCents Technology (NetCents Technology Stock Quote, Chart, News CSE:NC)
Market Capitalization: $23 million
Return Year-to-Date: -32 per cent
Electronic payment service provider NetCents, which in 2017 launched its own currency exchange, the NC Exchange, for users to buy and sell NetCents Coins. The company has recently changed approaches, now offering a merchant direct sales strategy to boost its per month processing volume and increase partner participation. The shift has netted the company a new private placement of $2.5 million which closed in June, while the company’s user numbers keep growing.
NetCents CEO Clayton Moore says the transaction processing volume for the month of August was up 539 per cent compared to just six months ago, with the company aiming to launch a cryptocurrency credit card, partnering with Visa, next year.
“We’ve been aggressive over the past two-plus years building an agile merchant gateway network. And, as we always believed, ‘if we build it, they will come,’ and come they have,” wrote Moore in a letter to shareholders this week.
“We’re excited by the prospect of empowering more consumers with the ease of crypto purchase. And we’re encouraged by the insights we’ll gain from real-time, real-life cryptocurrency credit card transactions. While maintaining strict standards for data protection and ensuring full regulatory privacy compliance, we’ll finally have empirical data to offer transparent insights on cryptocurrency spending and preference habits,” he says.
“The crypto mining market has materially improved in recent months….”
HIVE Blockchain (HIVE Blockchain Stock Quote, Chart, News TSXV:HIVE)
Market Capitalization: $86 million
Return Year-to-Date: -2 per cent
The company that lit the fire for Canadian blockchain stocks, Crypto-miner HIVE has had a rough go of it lately, including a contract dispute with its strategic partner Genesis Mining and the reduced value to currencies ether and bitcoin which drastically cut into the company’s bottom line.
But with a settlement reached with Genesis and its mining operations restarted in Sweden (where power prices have dropped considerably for mining operations) and the price of cryptos on the rise, things are looking up for HIVE.
PI Financial analyst David Kwan issued an update on HIVE in July, where he upped his rating from “Under Review” to “Neutral,” saying,
“With better clarity on the path forward, we are changing our recommendation to ‘Neutral’ and maintaining our Speculative risk rating. While the crypto mining market has materially improved in recent months, we note that there could be an overhang on the share price due to potential share sales by Genesis, uncertainty on who will operate HIVE’s GPU mining business and what the associated costs will be, and the broken partnership with Genesis (once a key differentiator),” writes Kwan in a client update.
Kwan gave a projected revenue forecast of $33.3 million for this fiscal year and $45.4 million for fiscal 2020, with EBITDA going from negative $2.0 million in 2019 to positive $9.4 million in 2020.
“Hut 8 remains committed to solely mining bitcoin and retaining an inventory of bitcoin for appreciation…”
Hut 8 Mining (Hut 8 Mining Stock Quote, Chart, News TSXV:HUT)
Market Cap: $203 million
Return Year-to-Date: +58 per cent
Bitcoin miner Hut 8, which operates mining centres in Medicine Hat and Drumheller, Alberta, has been the rare gainer in the world of Canadian blockchain stocks, adding capacity to its operations and, announced just last week, acquiring more data centres through its exclusive partnership with bitcoin software company Bitfury.
The company released solid numbers last month for its latest quarter, coming in with record revenue of $28.3 million and adjusted EBITDA of $17.3 million. The company mined a record number of bitcoin in its Q2 ended June 30 and saw a decrease in production costs per bitcoin from US$3,950 in its first quarter to US$2,757.
“Hut 8 remains committed to solely mining bitcoin and retaining an inventory of bitcoin for appreciation,” wrote CEO Andrew Kiguel in the company’s quarterly press release. “Management underwent significant cost saving measures at the end of 2018 to ensure we maintain a lean cost structure. The strategy led to improved margins and the ability to leverage the appreciation in the price of bitcoin. Our operations are stronger than ever, and we are poised for improved financial performance going forward.”