Over the past year and so the Crypto mania gained a frenzied pace and it is driven mostly by the naïve investors who think there is nowhere for the crypto prices to go but up. Many of the amateur investors believe the intrinsic value of the cryptocurrencies is found in the technology behind the coins that is blockchain. While it is true that blockchain is a valuable new technology, it’s absolutely false to assume you’ve got a stake in blockchain technology because you own some of the coins that use it.
This crypto mania has created a blockchain mania and it is hitting stock market now. After the SEC and FTC cracked down on Bitcoin-related investments, companies started using the building blockchain mania to drive prices higher.
Investors are buying shares of companies that are working on new ways to implement the blockchain technology.
But, just like the internet revolution of the late ’90s, until a better understanding of the technology and its potential applications comes to light, there are going to be stocks that go parabolic simply because they add the word “blockchain” to their name or company profile.
Just last month, three companies skyrocketed a combined 3,052% in a matter of weeks — one in a matter of days — as their names or profiles added the word “blockchain.”
First company is Riot Blockchain (NASDAQ: RIOT). Up until October of last year, Riot was a biotech company called Bioptix, Inc. It made diagnostic machinery for the biotech industry. And it traded in the $3–$4 range. But that was after three reverse stock splits in the past five years to get the price higher.
By December 19, 2017, shares hit highs of $46.20. What happened? The company announced that it was investing in cryptocurrency-related businesses. That was enough to drive the stock up 1,259%.
This is kind of like all those companies that added a “dot-com” to their names back in the 1990s and added millions to their market cap overnight.
The second one to ride this massive blockchain rally was a financial solutions company that IPO’d on December 13th to lackluster demand. The company, Longfin Corp. (NASDAQ: LFIN), specialized in offering foreign exchange and financing solutions to small businesses.
But two days after going public, it announced ties to a cryptocurrency and blockchain outfit called Ziddu.com. And shares went ballistic! Within two days, the stock was up 1,443% from the IPO…
Ziddu burned through about 90% of its capital in under an year on mounting losses. And the "coin" it created isn't even a real cryptocurrency. It’s not worth even close to the $7 billion that was added to LFIN’s market cap during the buying frenzy.
A few days later, Long Island Iced Tea (NASDAQ: LTEA) changed its name to Long Blockchain Corp. And shares jumped from $2 to nearly $7. This company literally makes iced tea and lemonade. That’s it.
But now, it also focuses on developing and investing in blockchain technology. And it’s called Long Blockchain. So, it’s worth 350% more.
Just like the internet, blockchain technology is going to be game changing. But, just like the internet, we’re going to see a lot of companies changing names and pumping up their prices thanks to the mounting frenzy to buy anything blockchain-related.
And it’s going to get worse before it gets better. So, the trick as an investor is to ride these waves to the top and not get caught when the bottom falls out.
Billions were made during the dot-com bubble. Billions will be made during the blockchain one, too. You’ve just got to make sure you’re not on the losing side when it all goes south.
One way to do that is to set a profit target and sell once you’ve reached it.
The second way is to take half of your investment out once you hit 100% gains — that way you’re playing with won money instead of earned money.
The third way to make sure you’re not holding the bag when the music stops is to pick companies that are worth investing in with or without blockchain.
And the best way is picking solid investments that could actually benefit from blockchain technology, and ones that have the technical knowhow to take advantage of the technology.
Enjoy riding this blockchain wave until it breaks. And when that happens, make sure to be on the winning side rather than on loosing side.
