CryptoGlobal Corp. (TSXV:CPTO) announced recently the beta testing of its crypto AI Insights platform that helps in analyzing buying, selling and trading crypto assets
SmallCapPower | February 9, 2018: CryptoGlobal Corp. (TSXV:CPTO) is one of the latest additions to the growing list of publicly-traded companies in the cryptocurrency and Blockchain space in Canada. CryptoGlobal currently trades at $1.50, down 18% from its high, as cryptocurrency prices have plummeted recently amid regulatory concerns. However, Blockchain is gaining increasing acceptance as a valid alternative to the current centralized transactions, which should benefit companies in this space including miners such as CryptoGlobal.
Investment thesis
- Diversified business model
- 8,600 machines already purchased with plans to expand to 50,000 by end 2018
Diversified business model
To mitigate risks associated with the volatility in cryptocurrency prices, CryptoGlobal is following a diversified approach to large-scale cryptocurrency mining and support services. In January 2018, CryptoGlobal purchased 8,563 units (2,500 operational) comprising S9’s, GPU rigs, D3’s and L3’s, which will mine four types of cryptocurrencies – Bitcoin, Ethereum, Litecoin, and Dash. These machines have been installed at two mining centers in Quebec, spanning 65,000 sq ft with the potential for future expansion. In terms of geographic diversification, the Company plans to install machines across four locations in Canada.
Source: Company presentation
On Feb 1, 2018, CryptoGlobal announced the beta testing of its proprietary crypto AI Insights platform that helps in analyzing buying, selling and trading crypto assets by aggregating news articles, social media posts, commentary and events in the crypto space.
Along with diversification, CryptoGlobal will also focus on growth by re-investing 50% of earnings into new machines as well as distribute excess cash to shareholders based on future availability. Any subsequent cash will be used to build a diversified portfolio of POS (Proof of Stake) coins. As well, strategic acquisitions and partnerships will also be considered for growth and to solidify market share.
Source: Company presentation
Aggressive expansion plans
CryptoGlobal wants to become the largest diversified cryptocurrency mining operation in Canada, and envisions re-investing its earnings as well as raising public funds to purchase new machines. From the current 8,563 mining machines, the Company is aiming to build 50,000 units by December 2018, by which time about 2,000 machines will be ordered per month.
Source: Company presentation
In terms of mine operational plan, Mine 1 will be fully operational with the current 8,600 units in March 2018; Mine 2 in July; Mine 3 and Mine 4 in December 2018.
Notwithstanding near-term weakness, Blockchain presents a large market opportunity
Blockchain is the database technology that underpins the rapidly-growing cryptocurrencies and encompasses a distributed ledger architecture unlike traditional databases where all information is included in one central database. Blockchain eliminates the need for an independent third party to validate transactions, as the Blockchain can ensure transactions and information is correct.
Role of miners: Public and enterprise Blockchains are secured and maintained by miners, which are nodes of computers that validate and process the transactions on the Blockchains itself. In other words, Blockchains rely on miners to secure transactions and control the creation of new digital currencies on a Blockchain.
Near-term weakness – cryptocurrencies marketcap plummets to ~US$400 billion: In less than a month, the market cap of cryptocurrencies fell ~ 50% from ~US$800 billion on January 7, 2018, to US$395 billion on February 5, 2018, with Bitcoin falling from US$17,000 (Mcap US$286 bn) to US$8,300 (Mcap US$103 bn) during the same period.
Source: CoinMarketCap
Despite the sharp fall in cryptocurrency prices, the mining of cryptocurrencies is still expected to be a lucrative business now and into the future. In line with the sharp correction in digital currencies, all cryptocurrency-related companies, including miners such as Hive Blockchain Technologies Ltd. (TSXV:HIVE), have seen their stock prices pull back significantly.
Outlook
With ambitious plans of increasing its capacity to 50,000 units by end 2018, CryptoGlobal is well positioned to generate meaningful revenues over the coming quarters. In line with other crypto and Blockchain players, the stock has declined on plummeting cryptocurrency prices due to regulatory concerns. However, as the cryptocurrency market stabilizes with increasing acceptance as a valid alternative to the current centralized transactions, companies involved in this space, including miners such as CryptoGlobal, could benefit immensely.
Disclosure: Neither the author nor his/her family own shares in the company mentioned above.
To read our full disclosure, please click on the button below:
