How to Profit from “Natural Bitcoin”

Crypto has become a mainstay in the mainstream media.

Bitcoin, which was supposed to provide a decentralized platform for payments and savings independent of the global banking system, has not lived up to its promise.

Ironically, its price has got some of its biggest boosts from talks about and promises of regulation.

Satoshi Nakamoto, the anonymous creator of bitcoin, must feel betrayed.

But he (or she, or they) must also be fabulously rich with an estimated net worth of about $129 billion.

And a lot of that net worth came from government chat about regulating the crypto market.

The government has pushed bitcoin into the mainstream investing space, opening this asset to millions of googly-eyed investors dreaming of untold riches.

Bitcoin got more popular and more expensive. Higher prices fed people’s fear of missing out; they joined the crypto bandwagon and pushed prices even higher.

But regulations aren’t here yet. So investors who don’t want to deal with obscure wallets, passwords, and trading systems craved for an easier way to buy bitcoin.

Enter the Crypto Hoarders

Companies like Microstrategy (now just called Strategy) started using their cash and taking on debt to buy bitcoin. The idea was to become a proxy for the crypto available to anyone with a brokerage account.

And it worked—for a time. This year, Strategy’s market cap soared above $100 billion. Strategy is now just one example of a “crypto treasury” stock. There are others doing the same thing. Yes, they have an operating business, but most of their value comes from their crypto holdings.

It’s a smart strategy to attract aspirational crypto capital. But it doesn’t work for wealth preservation.

And the “crypto treasury” companies have started feeling it already. It’s bad.

For example, a biotech company called 180 Life Sciences, which renamed itself ETHZilla and started hoarding ether, saw its value fall by more than 75%.

It holds about $460 million worth of ether, but its market cap is about 10% lower than that.

Crypto hoarders started looking like poorly executed ETFs.

Now they are buying back shares to boost their share prices. Which has nothing to do with crypto and has everything to do with the crypto hoarding trend declining.

This is why here at The Wealthy Miner, we’re skeptical about this business model. Especially if you contrast it with another one… which is resource juniors.

A Better Alternative to “Digital Gold”

The best alternative to “digital gold” is gold.

If an exploration-stage company makes a discovery, the market tends to notice. And it starts to estimate the value of the gold the company may have found.

If it’s a new discovery, the discount is steep. The market may think that the outlined body of mineralization could be worth $100 million at spot prices, but since there’s quite a bit of uncertainty about that, it would value those ounces lower.

As a gold junior progresses from the original discovery to resource estimates, economic studies, and, eventually, production, the value of these ounces (and the newly discovered ones) goes up.

A company with one million ounces in Proven reserves will be valued closer to spot. If it goes into production, the discount to spot will be lower still.

You see the pattern. At each stage, the market assumes that the company owns some gold.

You may even think of gold juniors as “gold treasury” stocks.

If gold goes up, their value does, too. If a company finds more gold and the metal’s price increases, its share price can potentially multiply.

And there’s another thing.

Mining bitcoin is almost impossible at this point. Even multibillion-dollar businesses like Strategy can only buy so much of it.

But a junior gold company can make a discovery and double or quadruple its gold “treasury” almost overnight…

That would never happen to a crypto hoarder. They can only grow their treasury by selling their shares (and diluting existing shareholders) or issuing debt—with its related future problems.

In other words, gold juniors have two massive catalysts: the price of gold and the amount of gold they have discovered.

The upside of those “crypto treasuries” is limited mostly to price increases… and even then, as ETHZilla has found out, Mr Market may decide to value those fully mined and ready to use coins at a discount.

We’re not against crypto. There are ways to play it.

But when it comes to pure upside, it’s hard to beat gold stocks.