By some measures, it was the most extravagant dinner of the century.
A banquet consisting of two Papa John’s pizzas — one cheese, one Supreme — valued at approximately $345 million in today’s dollars.
Just feast your eyes on the pure decadence of it:
(What, no breadsticks?)
Yes, those are the now-infamous “Bitcoin Pizzas.”
Which means this exorbitant dinner wasn’t actually bought with a few hundred million in spare change, but instead with 10,000 bitcoins.
And at the time of the purchase, back in 2010, that amount of bitcoin was only worth about $41 — not a bad deal to feed a family of four.
More importantly, the transaction was a proof in concept.
Laszlo Hanyecz (the man in the picture, above) had spent months mining thousands of bitcoins, and he wanted to actually use his digital currency to buy something. It wasn’t a simple proposition at the time.
After all, Hanyecz couldn’t just call up Papa John’s and offer to pay in crypto. Most retailers still don’t take crypto today.
So Laszlo posted a trade offer (bitcoins for pizza) online at the Bitcointalk forums. It took a few days before a student and fellow bitcoin aficionado named Jeremy Sturdivant agreed to the trade.
Sturdivant then had to make a long-distance call from California to a Papa John’s in Jacksonville, Florida, to order the pizza.
Not exactly the most convenient way to buy dinner for your family.
But it was the first real-world transaction using crypto … the first in what would eventually become a rapid-fire flurry of major milestones on the road to mass adoption.
Leaping Forward at Lightspeed
That same year, in 2010, the “Mt. Gox” cryptocurrency exchange went live out of Shibuya, Tokyo.
It was a very basic platform, but crypto adoption was spreading fast. More and more people were beginning to see cryptocurrency not just as a means for transaction, but as an enticing alternative investment.
And if you weren’t mining bitcoins, the only place to acquire them were at online exchanges like Mt. Gox.
These early exchanges were completely unregulated. And you weren’t exactly dealing with sophisticated operators (Mt. Gox was originally started as an online marketplace for fantasy trading cards).
But it was convenient at least, and crypto demand was starting to go through the roof. Plus, Mt. Gox was early … and so by 2014, it was responsible for 70% of all online bitcoin trades.
Just a few years later in 2017, a man named Changpeng Zhao (nicknamed “CZ” by the media) founded his own cryptocurrency exchange called Binance.
Binance has since grown to become the world’s single largest crypto exchange, with 90 million customers worldwide and $76 billion in daily trading volume. His company has over 7,000 employees and $12 billion in yearly revenue.
These are quantum leaps forward in terms of the scale and sophistication of the crypto market.
Of course, this kind of growth hasn’t come without growing pains (and fraud). Like the recent collapse of FTX, and the ongoing court case against its wunderkind founder Sam Bankman-Fried.
But despite the setbacks, the cryptocurrency market has persisted — evolving faster than anything else the financial world has ever seen.
And now, as soon as January 2024, we could see bitcoin — considered by almost all as the most stalwart and robust of all cryptocurrencies — surge past the last major barrier holding it back from mass financial adoption…
Bitcoin’s Big ETF Breakthrough
Blackstone recently submitted a proposal to the SEC for a Spot Bitcoin ETF.
The SEC is expected to approve of this new exchange-traded fund (ETF) before the end of the year, which would make it the first fund of its kind to hit the American stock market.
To accurately track the spot price of bitcoin, this new ETF will buy bitcoin at market as investors buy shares of the ETF — much like how gold ETFs trade in bullion. So when you buy shares of the ETF, you’re indirectly buying bitcoin.
Except since it’s an ETF, this is bitcoin exposure you can simply buy and hold in your retirement account. It’s a bitcoin position that’s much easier for any wealth manager or financial fiduciary to work with.
In addition to the financial flexibility, this new ETF will drastically simplify crypto ownership for those who might otherwise be intimidated by all the technical jargon and extra hoops to jump through. No need for a “hot wallet” or any special passwords; you can just keep your crypto in your brokerage account.
That’s a level of ease, access and safety that bitcoin investors haven’t had before.
For the crypto market itself, a new spot ETF means one thing — massive volume.
NYDIG, a crypto research firm, estimates that a Spot Bitcoin ETF could see $30 billion in demand on day one. The fund would need access to tens of thousands of bitcoins just to cover that initial demand.
Since bitcoin is a finite asset (only 21 million will ever exist), higher demand should inevitably lead to higher prices.
Bitcoin has already surged more than 23% over the past month, setting a new 17-month high that qualifies as a bullish breakout from the “bottoming” pattern that it carved out between last summer and this summer.
I don’t typically make specific cryptocurrency recommendations. (I leave that up to my colleague Ian King, who’s one of the best in the business.)
But if a new bull market in crypto unfolds, there is one sector I’ll be watching very closely…
2024: The Year of Crypto Miners?
Soaring cryptocurrency prices and demand are extremely powerful tailwinds for cryptocurrency miners.
Much like gold miners, crypto miners can work as a leveraged play on the underlying asset. It’s all about the costs involved.
CoinDesk estimates it costs between $10,000 to $15,000 to mine a single bitcoin. If you’re selling that same bitcoin at market for $20,000, you’re making as little as $5,000 in profit. But when prices go up slightly to $25,000, your mining profits suddenly double. And when bitcoin goes back up to $60,000 … well, you get the idea!
That’s what we saw during bitcoin’s last big run-up in 2021. The crypto itself saw gains annual of nearly 300%, but one of the market’s top miners soared over 1,600%.
Another major factor for crypto miners in 2024 is bitcoin’s upcoming “halving.”
After that, new bitcoin rewards for miners will become scarcer. This will squeeze out some of the market’s weaker miners, opening the path to even more growth among the top competitors.
Go Beyond the Green Zone for Major Mining Profits
Long-time readers of my work here at the Banyan Edge likely know me as the “ratings guy.” I’ve built the Green Zone Power Ratings model to leverage six of the investment factors that have proven to generate market-beating returns.
So you may be wondering: How do bitcoin miners rate?
Frankly, the answer is … not so great.
But that’s largely the result of two understandable factors.
First, most publicly traded bitcoin miners are relatively young, so they have far less operating history than a decades-old company such as Microsoft. Since my ratings model considers data as far back as 10 years, newer companies are “penalized” simply for being young.
What’s more, many of the bitcoin miners are aggressively reinvesting revenues and gross profits into additional infrastructure, rapidly increasing production capacity and paving the way for future growth.
That, in turn, is reducing or eliminating their net GAAP profits and cash flows today — particularly since they’ve just had to trudge through another “crypto winter,” whereby bitcoin prices were dramatically depressed.
To put some actual numbers to it, I had my team run the holdings of the Valkyrie Bitcoin Miners ETF (Nasdaq: WGMI) through my stock rating system.
WGMI rates a lowly 35 out of 100 overall, and that score would be even lower if it wasn’t buoyed by the bullish ratings of two mega-cap semiconductor stocks, NVDA and TSM, which the Green Zone Power Ratings system has at 66 and 78, respectively, at the moment.
Here’s the breakdown of Green Zone Power Ratings for each stock in the bitcoin mining ETF (note that almost half the stocks in the ETF are too small to even have a Green Zone Power Ratings score, as denoted by the “#N/A” fields):
Crypto Mining ETF: Lackluster Green Zone Scores… But Serious Opportunity?
Frankly, if you’re waiting for bitcoin miners to become an obvious and solid investment … you’ll end up joining the herd once most of the biggest gains are already gone.
I suspect that by the time 80% of bitcoin miners rate 80 or higher on my model … upward of 80% of the sectors profits will have already been doled out to early (and brave) investors.
I just recommended one bitcoin miner to readers of my 10X Stocks service, since I believe it has the potential to go “10X” higher over the course of the next bitcoin bull market.
But I certainly understand that a leveraged play on bitcoin isn’t for everyone. Perhaps, America’s first Spot Bitcoin ETF will be … once it’s finally approved by the SEC.
Just don’t spend it all on pizza!
To good profits,
Adam O’Dell
Chief Investment Strategist, Money & Markets
