The oil industry is dead, and there’s no reviving it…
In April 2020, the U.S. was in the early stages of the COVID-19 pandemic. States locked down. You couldn’t venture outside… travel… or shop.
The economy ground to a halt.
Oil demand collapsed. And on April 20, crude oil prices closed at -$37.63. That’s right. It was the first time in history oil closed below zero.
Immediately, the mainstream media ran stories predicting the end of Big Oil.
CNN Business even had this alarming headline: Oil Prices Turned Negative. Hundreds of U.S. Oil Companies Could Go Bankrupt.
Of course, they were wrong…
Global oil demand quickly bounced back. Some analysts forecast we’ll reach pre-pandemic levels of 100 million barrels per day by the end of 2021.
Over the past year, the price of oil has surged over 85%… And energy is currently the best-performing sector of the market.
Here’s why I’m telling you this…
Often, I’ve found that the mainstream media is wrong about major events of the day. And just going in the opposite direction of what they say can make you money.
I saw this in March 2020 – as pandemic-related volatility ripped through the markets. While the media was fearmongering… I cautioned you to sit still and not sell.
Here’s what I wrote then:
The bet I’m making with stacks of my own money is this: We’ll either be at or have exceeded the old highs within 18 months. I picked 18 months for a reason. By then, we’ll have a vaccine, and people will start traveling and going out again.
If you followed my advice and just remained patient… you would’ve ridden the market up 76%. We’re seeing the same thing play out in bitcoin (BTC) and bitcoin-related stocks.
And if you sit tight and play your cards right, you’ll see a similar rebound in bitcoin and a subset of bitcoin-related stocks just like we saw in oil and just like we saw in the overall stock market…
A Blessing in Disguise
Over the last month, the mainstream media has been blaring China’s crackdown on bitcoin miners.
For instance, CNBC ran this headline just last week: China’s War on Bitcoin Just Hit a New Level With Its Latest Crypto Crackdown.
Now, it’s true China has escalated its crackdown on crypto. The government is shutting down everything from payment providers using bitcoin… to crypto exchanges.
But we’ve seen this movie before…
Back in 2017, China tried to ban crypto exchanges in the country. Bitcoin fell 21% off the news. It’s since rebounded by as much as 1,694%.
More recently, China has threatened to go after bitcoin miners. It’s targeted the Sichuan province… which accounts for over 90% of the country’s bitcoin mining capacity.
Miners provide the computing power necessary to run the bitcoin blockchain. They solve complex equations to verify transactions and keep the network humming along.
The incentive for devoting their time and processing power is a daily bitcoin reward.
Since China announced its more aggressive crackdown, bitcoin has dropped 50% from its all-time high of $64,863.
The hysteria also has caused a selloff in publicly traded bitcoin miners. The 10 largest publicly traded miners are down an average of 48%.
Friends, this is an incredible buying opportunity.
We have a chance to get into these miners at a discount… and watch their prices soar as the mainstream media is proven wrong yet again.
China’s Loss Is America’s Gain
By kneecapping its miners, China has left the field wide open for U.S. and Canadian miners.
Let me explain…
China’s crackdown has caused the global bitcoin hash rate to drop more than 50%. And that’s good news for North American bitcoin miners.
Without getting into the weeds, the hash rate is the collective computing power of all bitcoin miners worldwide.
Here’s why that’s important…
The higher the hash rate, the more computing power miners need to compete for the same amount of bitcoin rewards. The lower the hash rate, the less computing power miners need to compete for those same bitcoin rewards.
For instance, crypto firm BitOoda measures mining efficiency through its North American Hash Spread survey.
The spread is the difference between the cost of power per megawatt… and the bitcoin mining revenue per megawatt.
The current hash spread is $418. That’s nearly double the spread of $230 recorded only one month ago.
Think of it as a measure of how effective bitcoin miners operate, given the equipment they have.
The higher the spread… the more bitcoin miners can earn per unit of electricity paid for. That “extra” bitcoin goes straight to their balance sheets.
Simply put, North American bitcoin miners are earning more bitcoin. And that will be bullish for bitcoin-mining stocks.
How to Play This Trend
With hash rates dropping, North American miners will be the biggest beneficiaries. They’ll earn the bulk of bitcoin rewards.
And they’ll be sitting on a war chest of BTC.
What do you think will happen when bitcoin’s price rallies? The value of their BTC will explode. And the more bitcoin’s price goes up, the more miners will hoard their bitcoin.
Historically, bitcoin miners haven’t been able to hold the bitcoin they mine. They’ve had no choice but to sell it to fund their operations.
But we’ve seen crypto adoption take off significantly over the past few years. And huge players like Morgan Stanley, Goldman Sachs, and MassMutual are taking notice.
One after another, these big institutions are now coming into crypto. And that means now, for the first time, miners can raise money through the capital markets by issuing shares (equity) or bonds (debt).
We’re moving to a world where bitcoin miners will no longer have to sell their bitcoin to fund their operations…
And that’s going to change everything.
So ignore the mainstream media when it comes to bitcoin. They get attention by blaring negative headlines. And like they were with the oil industry, they’re often wrong.
They’re missing the big picture. And when you pull back the lens, you’ll see China just gifted virtually the entire bitcoin mining industry to North America.
If you want broad exposure to this trend, consider the Bitwise Crypto Industry Innovators ETF (BITQ). It has broad exposure to miners… but also includes companies in the broader blockchain ecosystem. So it’s not a pure-play on miners.
Let the Game Come to You!
Editor, Palm Beach Daily