Disclaimer: I am not a financial advisor nor should you invest in a company based solely on my research. Take my research for what it is and do your own research and make your decision based on that. I’ve been invested in HIVE since it was at $2.70 a share in January 2021.
Hive blockchain is a Canadian based blockchain company that looks to connect blockchain technology with traditional capital markets. Currently listed on the TSX, and in the process of being listed on the NYSE, HIVE has significant potential in being a great investment to expose your portfolio to Bitcoin and Ethereum without actually owning any of the coins.
Financials and Operations
HIVE is in the business of building an empire built on creating infrastructure in the new age of Web 3.0. Currently, the company has been ramping up their operations in Ethereum and Bitcoin mining, an aspect of the company that I highly agree with. For starters, the company’s infrastructure exists in Iceland and Sweden, both are huge players in the crypto space. Iceland is a prime location for mining rigs as its natural cool temperature is great for overheating technology as well as the country runs off of 100% renewable energy. Sweden is in the same ballpark, with an emphasis on clean energy in the country, HIVE’s operations in Sweden allows it to reduce its ecological footprint as well as the country is very stable and open to crypto currencies.
Mining Strategy: HIVE’s current strategy is growth. SInce 2017, their focus has been on ramping up their mining capabilities and diversifying their operations. Evidence of their diversification is present in their mining of Ethereum, whereas most companies in the space have been solely focused on mining Bitcoin, HIVE has been mining both cryptos. This is a positive and a negative from my perspective. On one hand, I’m very skeptical about Ethereum’s place in the crypto world in the coming years. Although the project is massive in scope, it wasn’t built on a solid foundation and therefore projects like Cardano look like they’ll be able to easily outperform and outscale Ethereum, thereby rendering Ethereum useless. I may be wrong about this, ETH 2.0 may solve the majority of Ethereum’s problems, but until its release my belief is that Ethereum is the MySpace of the crypto world; cool at first but quickly overshadowed and forgotten. Alternatively, if Ethereum can stand the test of time and solve the issues that plague its ecosystem currently, then the mining of Ethereum will have larger payoff than the mining of Bitcoin as I foresee several cryptos surpassing Bitcoin with time as Bitcoin’s use is simply a store of value- to replace gold. Other cryptos with real world cases will surely be worth man than a store of value.
First Mover Advantage: I’m not a huge fan of this tactic, to some degree. In recent times, too much emphasis is placed on first mover advantage by various companies in various industries, only for them to be overtaken by more well-thought out companies and strategic planning. Building a company for the long-run is the key, as Peter Thiel said “First mover advantage is a tactic not a goal”. In the context of HIVE’s first mover advantage, I think in this instance it will create a sustainable competitive advantage for them for quite some time as they ramp up operations. Being one of the first companies to mine the cryptos is crucial as it allowed them to accumulate Bitcoin and Ethereum at earlier levels of difficulty thereby reducing their costs early on. Additionally, they acquired massive amounts of GPUs before the GPU shortage that is now taking place from 2020 and carrying over into 2021. With worldwide shortages of GPUs, HIVE has a substantial first mover advantage due to the fact that it was able to acquire large amounts of computing power before this shortage. HIVE is also acquiring more GPUs in 2021 through a de-risk method of having multiple suppliers provide them with their shipments.
Overall Strategy: HIVE’s overall strategy looks to be growth, growth and cost reduction. They are rapidly ramping up their mining warehouses while at the same time reducing costs to prepare for the crypto winters that are inevitable. In their financial report on youtube, they mentioned their HODL strategy. Two thumbs up from me, not for the memes but because they have a clear understanding of where crypto is going and that holding their coins for the long term will pay the biggest rewards. They also mentioned MetCalf’s Law in their presentation, another positive hint that they understand the power of the mass adoption of crypto that is on the horizon.
EGS Strategy: For those that don’t know, EGS is Environment, social and corporate Governance. Although standard investing and the financial world doesn’t like to factor in the environmental and social impacts of business, more and more individuals, especially millennials, invest and purchase products from companies that put emphasis on sustainability and social causes. Prime example being Tesla. With regards to HIVE, because of the location of their operations and foundations they were built on, they have low electricity costs, fast internet connections and low temperature warehouses. HIVE is positioned flexibly in the electricity market thereby taking power from various electrical sources. With their software they are able to slow drop and restart energy demands in seconds, plus they can capture excess heat generated and sell it back to the market.
I love the focus they have on their business operations’ ecological footprint. This is crucial for long term business where climate change is the most pressing concern worldwide but especially important in the industry of mining cryptos as one of the biggest complaints of the sector is its power consumption.
Concerns: In my opinion, I don’t see the future of crypto being proof of work. When asked how the company plans to implement proof of stake in the future, they said right now they are looking to accumulate and then proof of stake those coins for large income streams. This is a solid business plan in the future if you can stake Bitcoin and Ethereum as they will have large amounts accumulated. But I would like to see more emphasis on the purchasing and transitioning to other cryptos like Cardano and Polkadot, two easy solid investments in my eyes, the Bitcoin and Ether of the next generation cryptos. Besides that, the company has a solid business model right now which is almost guaranteed to pay off which is evident through the fact that it has roughly $30 million in profits but is valued at almost 2 billion dollars. If ether and bitcoin continue to grow exponentially, then their mass accumulation of these tokens will easily be worth billions more in the following decades, this investment is definitely a long-term one.
-Solid Business Strategy
-First Mover Advantage
-Leaving some opportunities on the table but their lack of cash may be why this is
-Company is currently expensive compared to its earnings , but the accumulation of cryptos with potentially higher future values needs to be taken into account