Consider Cryptocurrency Plays Without Big Volatility Risk

Ned Piplovic


While some investors flocked in droves to invest in cryptocurrencies in 2017, other investors remained on the sidelines fearful of price volatility and unsure whether cryptocurrencies are sound investments.

However, there are ways for investors skeptical of cryptocurrencies to take advantage of the current price boom through more conventional investment vehicles and avoid most of the risk and volatility associated with buying and trading cryptocurrencies. Here are some investments to consider for those who want to benefit from the upside without extreme risk.

Just as precious metals must be mined, individual units of cryptocurrencies are created through a process called “mining.” It is a process where computers run software that solves a complex mathematical algorithm to confirm and track cryptocurrency transactions. Like traditional precious metal mining operations, cryptocurrency mining requires considerable resources and many supporting industries.

In the initial stages of Bitcoin mining, a mid-level desktop computer had sufficient processing power for the cryptocurrency mining process. However, mining algorithms are designed to get progressively more difficult, which require more processing power and more energy.

Therefore, companies are developing computers designed for mining cryptocurrencies, which can be quite expensive. Bitmain’s latest unit costs approximately $7,000. Investors could cash in on this demand by investing in industries and companies – such as Advanced Micro Devices, Inc. (NASDAQ:AMD) or NVIDIA Corporation (NASDAQ:NVDA) – that supply components for these cryptocurrency mining rigs.

Additionally, electric utilities have benefited from the cryptocurrency mining expansion. According to the Bitcoin Energy Consumption Index, current electricity consumption for Bitcoin mining globally is approximately the same as the total electricity consumption of countries like Qatar or Hungary. The energy consumption for mining in the United States is only 1% of total electricity consumption. However, The Netherlands uses almost 30% of the country’s total electricity consumption to support Bitcoin mining. The Czech Republic – at 59% – has the highest share of total electricity consumption used by Bitcoin mining operations.

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Therefore, investors wary of cryptocurrencies can still take advantage by investing in computer components manufacturers and electric utilities, especially in countries that use a large share of its total consumption towards Bitcoin mining – The Netherlands and the Czech Republic – or China, which has the majority of current Bitcoin mining operations.

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