Bitcoin Mining and Impact on Capital Markets
For the past few years, China has been the main powerhouse in bitcoin mining. At the peak, between 65% to 75% of all mining activities were in China. However, in recent months the government of China has been signaling that this era is coming to an end, or at least the miners must curtail their activities. If true, the question will be: where will the mining operations be transferred and what are the implications?
In terms of the location, there are a few good candidates with Eastern European countries on top of the list. By the same token, any developing country where the cost of energy is cheap with a relatively decent legal structure would be a good candidate. What about developed countries, specifically US and Canada? It appears that there is ample appetite in both countries to allow increased activity in bitcoin mining. The business case is that miners can use waste such as oil and gas byproducts to fuel high-tech electricity generators. Contrary to general perception, this could be good for the environment if we subscribe to the idea that we need the underlying operations that produce waste for the time being. In addition, miners can use the excess electricity using the normal grid.
In light of the expected changes, are there any winners benefiting from the relocation of mining operations?
Utility (see below energy ETF’s for your consideration)
Housing & Real Estate as skilled workers (who are usually paid handsomely) will relocate to areas that the operations are established. If you know a possible location for such operations, you can invest in the REITs that own and operate properties in the target area. Taking advantage of this option requires knowledge of the area as well as REIT’s. Contact us for additional free information.
Investing in companies that provide crypto services, such as Coinbase Global Inc. (NASDAQ: COIN). As US become more invested in crypto activities, authorities and law-makers will start to regulate the activities. Although it is possible that they will understand the concept incorrectly, but setting that slim possibility aside, any type of regulation (except for flatly opposing it) will benefit the crypto industry. This will help to weed out the opportunistic players and give upper hand to the legitimate players.
Here are some suggested utility ETF’s:
VPU (Vanguard Utilities ETF)
Total assets: ~$4.7 billion
3-year return: 9.50% | 3-month return: 11.79% | 1-month return: -2.34%
PAVE (Global X US Infrastructure Development ETF)
Total assets: $3.7 billion
3-year return: 17.50% | 3-month return: 15.83% | 1-month return: 2.59%
IFRA (iShares U.S. Infrastructure ETF)
Total assets: $650 million
3-year return: 11.66% | 3-month return: 15.11% | 1-month return: 1.17%
XLU (Utilities Select Sector SPDR Fund)
Total assets: $11.7 billion
3-year return: 10.37% | 3-month return: 12.49% | 1-month return: -2.34%
