Investing Beyond the Blockchain Hype

In the 1990s, when you wanted to increase the value of your stock as a company, there was an easy option: add ‘dotcom’ to the end of the name.

Back in the 1960s, you added ‘tronics’ — as in electronics.

Every figurative or literal gold rush brings in its fair share of excited prospectors. As well as charlatans, con men and enthusiastic businessmen looking to make money from the prospectors.

Today, the magic word is ‘blockchain’.

Analysis this week from Autonomous Research, a research provider on financial companies, shows more than 31 companies in the US have ‘pivoted’ very far into the blockchain business.

Just this morning, Eastman Kodak Company [NYSE:KODK] — a camera company decimated by the digital camera revolution — looked to maybe redeem itself by launching its own ‘Kodak-coin’ token.

The share price jumped 130% on the news.

Just a few days ago, Long Island Iced Tea Corp. changed its name to Long Blockchain Corp. [NASDAQ:LBCC]. It is raising money and turning itself into a bitcoin mining company. The stock price rose 200% on the news.

However, Long Island Iced Tea currently has no actual businesses tied to blockchain. It’s basically a tiny beverage company in Farmingdale with sales of less than $1.6 million per quarter.

Chanticleer Holdings, an owner of burger restaurant chains, including the infamous Hooters, announced on late Tuesday that it would launch a blockchain-based rewards program.

The share price shot up 50%.

Another company, Rich Cigars, Inc. [OTC:RCGR], saw its share price rise from 3 cents to 70 cents on the news that it too was now a blockchain company.

Apparently, the directors think the crypto mining industry will buy them more Cuban cigars than the actual cigar industry…

It’s become so crazy that even the normally staid regulators at the US Securities and Exchanges Commission got in on the action with this tongue-in-cheek tweet yesterday: ‘We’re contemplating adding “Blockchain” to our name so we’ll increase our followers by 70,000 percent.

This is all madness, isn’t it?

Maybe so. But that doesn’t mean you can’t make a buck from it.

And it doesn’t mean there aren’t big things happening below the surface.

Let me explain…

Beyond the fads

What both professional and naïve investors don’t get is the same thing investors in the dotcom boom didn’t understand.

The professionals don’t get the enormity of it. They think it’s a fad.

And the naïve companies don’t understand the actual repercussions of blockchain. They fail to grasp that it is a transformative technology, and not simply a word you add to a company name.

This is how I frame it…

Blockchain technology does one simple thing: It decentralises the storage and transfer of data.

That’s the basis of the data revolution we’re in.

It’s not about burger reward points or cryptocurrency mining. These are just facets of the industry. Not bad ideas necessarily, but not the main game.

Now, that one simple use — the ability to store and transfer data in a decentralised system — is as transformative as the connectivity of the internet was back in the 1990s.

The implications are profound. 

Think about it…

Why do you need a bank?

Why do you use Facebook, Uber or Airbnb?

Why do you use Google?

Why do you need a settlement agent or lawyer when you buy/sell a house?

Why do you store your data with Amazon cloud services?

Why does a lawyer store your will?

Why are government services like Centrelink such a hassle and always prone to making mistakes?

Why do you need an accountant to audit your books and do your tax return?

Blockchain technology improves every single one of these industries, and many more. That’s because, ultimately, they all store, validate and exchange data in some way.

That is what their value is based upon.

Blockchain technology does away with the need for these middlemen.

But that’s just the start…

Where the real gold lies

As you probably know, blockchain has already revolutionised one industry. The initial coin offering (ICO) boom has changed the face of venture capital.

For better or worse, this new system takes away the power of the former gatekeepers. In my opinion, that’s a great thing. Though you have to know that it’s incredibly risky.

As I said at the start, any gold rush attracts scammers. But there is also real gold too.

So why shouldn’t you have a chance to get in on it?

But to do this properly you need to understand that Long Island Iced Tea company isn’t part of this revolution.

The real companies that will benefit will probably not have the world blockchain in their name.

They will be companies that strengthen their position by using the technology. Or by making themselves crucial contributors to the data-value chain.

At its heart, blockchain is a data revolution.

Certain companies will benefit over the next few years, creating life-changing fortunes.

These are the companies you should be looking for.

Good investing,

Ryan Dinse,
Editor, Exponential Stock Investor

PS: In October last year, I set up a stock advisory service that aims to help you benefit from the blockchain boom the smart way. Already one of the stocks is up 336%. Importantly, though, the public still doesn’t get it, distracted as it is by the fads. But that’s good news for you. It means that the real opportunities are still there for the taking. You can find out more here.

Ryan Dinse is an analyst at Markets and Money. He has two decades of experience in financial planning, equity analysis and credit markets. Ryan combines fundamental, technical and economic analysis to identify and invest in good ideas at the appropriate stage of the economic cycle. He has a strong interest in technology, economic history and disruptive business models. His focus at the moment is as lead analyst on two of our most recent and innovative investor services, Crash Market Investor and Sam Volkering’s Secret Crypto Network. He will write about the exciting opportunities for investors to benefit from significant changes in world markets. He is a member of Fintech Australia, a former member of the Digital Currency Council, and is a fully accredited financial adviser.

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