“I can’t get GPUs at all right now,” said the guy in the next office to one of his clients on the phone, loud enough for me to hear. “There’s none to be had. It’s fucking nuts.”
This was interesting to hear, because the guy in question runs a local gaming technology company, making great money setting up the hardware and software for coding house and game studios across Canada. GPUs, or Graphics Processing Units, are his core business, literally.
This is a GPU.
You’ve probably seen one in your kid’s high performance gaming rig, or at least paid for one. There’s usually no shortage of them at your local Best Buy, but more recently you’re more likely to get one by paying absurdly high prices for used cards on Craigslist, because there’s none to be had at the usual places.
An example: Search online for a Radeon RX 480 GPU and you’ll find it normally sells for $250. On eBay right now it’ll set you back anywhere from $400 to $650. On Amazon, a private dealer is advertising one for $967.
Why?
Bitcoin. Or, more accurately, cryptocurrency. Let’s hear from Forbes:
Originally, these machines may have been targeted for gaming but now their graphics cards can also serve as powerful processing engines for crypto-mining, so much so that there’s been a run on both NVIDIA and AMD GPUs, driving retailing pricing through the roof on basic supply versus intense demand market dynamics and price gouging.
How big a shortage are we talking about?
Crypto miners—in particular those mining ethereum, the second largest cryptocurrency by market valuation behind bitcoin—have been in the crypto equivalent of a gold rush since early this year. They are racing to take advantage of ethereum’s exploding price by adding more processing power to their mines. Some of them are even resorting to leasing Boeing 747s to fly the increasingly scarce graphics processors from AMD and Nvidia directly to their ethereum mines so they can be plugged in to the network as quickly as possible.
They’re LEASING BOEING 747S AND FILLING THEM WITH GPUS ACQUIRED RIGHT AT THE FACTORY DOOR. Not since the Miami cocaine hey days of the 80s has anyone rented Boeings to deliver a product because the profits were so insane you couldn’t wait a few extra days for traditional delivery.
“Time is critical, very critical,” in mining, Marco Streng, chief executive of Genesis Mining, a major ethereum miner, told Quartz. “For example, we are renting entire airplanes, Boeing 747s, to ship on time. Anything else, like shipping by sea, loses so much opportunity.”
Up for grabs is a supply of roughly 36,000 units of new ether, the digital token associated with ethereum, per day. At current prices of around $200 per ether, that translates to $7.2 million worth of ether that miners compete for each day.
Nvidia (NVDA:NASDAQ), which supplies a lot of the cards out there, is up 70% since May. AMD (AMD:NASDAQ), their main competitor, isn’t doing as well, being as it’s mired in debt and focused more broadly on CPUs. If you were looking to make a good chunk of cash investing in the crypto rise, neither is a particularly entrancing option for high risk/high reward guys (though both are sure o do well), because neither company can ramp up production – or jam its prices up, due to existing supply contracts – fast enough to really take advantage of the shift. In essence, Best Buy will do as well out of all this as Nvidia will.
Sure, they’ll sell everything they produce. But they kind of already do, eventually.
This has led to a crush on the junior markets for something – anything – that’s blockchain or bitcoin related but where the profit hasn’t been generated yet. I often get calls asking if I know of a company looking for a shell in whatever sector is the craze of the moment – lithium, weed, cobalt, weed… but I’ve never got so much phone pestering as I have Vancouver dealmakers asking about blockchain/crypto deals in the last week.
One of the first has recently been announced by Ancana Capital (ACM.C), which is going fucking crazy right now. The stock jumps in leaps and bounds, and has done so consistently over the last few days, despite a PP being open way below market value.
Ancana had a $0.25 pp going to raise $2.5 million, but the stock price opened at $0.50 a week ago, and ran so hard they quickly adjusted it to $3.5 million at $0.35. That hasn’t stopped the run – ACM stock hit $1.00 yesterday.
It’s a bona fide maniac. As I began writing this, the bids were at $0.86 and the ask at $0.95. Looking at the level II numbers, there was only 40k shares in buying between ACM’s then price and $1.28. That said, there was the same amount of selling between the current price and $0.78.
Like I said, high risk, high reward.
Today? Ancana is trending down as hard as it trended up, with folks taking nice profits.
The concept at Ancana, if you even care at this point, since anything blockchain flies without restraint, is they want to provide wallets to the crypto user that are attached to actual ID, with the more ID you provide bringing your account added trust, which presumably means people would be more happy to do business with you. Supply a driver’s license, get a higher trust score. Supply a passport, go deeper still.
The other side of this is, hello law enforcement, which is said to be deep in conversations to pay for access to a blockchain that allows them to track bad trades and clean up the playing field some.
There’s more to it – much more – but that’s the key to Blockchain Intelligence Group, which is what Ancana is buying into.
Now, you can get into a long back and forth about how crypto is supposed to be anonymous and how such a set up would see you go elsewhere to do your trading of Bitcoin and Ethereum, and that’s fine. What ACM is betting on is there are a lot of people who actually want that added level of trust, so they don’t end up accidentally selling their bike to a Columbian drug lord, and getting a knock on the door from the feds. Their thinking is, this likelihood keeps a lot of commerce away from the cryptocurrencies.
Neither here nor there: The people investing in ACM right now have a heavy trigger finger sitting on both their buy and sell buttons, because they’re not playing the company as much as they’re playing the flow of the market. In fact, I bought in at $0.70 a few days ago, sold at $0.88 today.
That ACM PP looks very attractive at $0.35, but consider the four month hold that comes with it, and what could happen to the space, or that company, during that time. On a gold deal, you have a good sense of what the four month trade hold that comes with a private placement deal will bring. On a crypto deal? You’re playing the Greater Fool strategy right now, and that relies on you being able to bail out before everyone else.
And so they buy ACM at a buck and do so happily.
There are other crypto deals out there. One I really like is related to that story way above, about renting out Boeings to fly GPUs around the world.
HIVE Blockchain is a deal coming together with the strong musky aroma of the Frank Giustra posse from Fiore Group, which did phenomenally well on lithium recently with Lithium-X (LIX.V), and has now got its mitts into a company called Genesis, that mines Bitcoins and Ethereum for a living, and does so at a scale unsurpassed globally. This outfit built the first industrial Bitcoin mining operation in 2014, and another for Etherum in 2016. It’s causing that GPU shortage, in no uncertain terms.
HIVE is buying Genesis’ Iceland-based state of the art mining facility for $7 million, and will be generating revenue on that from day one.
Why Iceland?
Cheap power. Cold climate. Fast internet.
Also, Crossfit girls. But I digress.
No, seriously, Iceland is famous for its female Crossfit champions. I’m not being skeevy.
Anyway, terms have been agreed to acquire four more data centres in Northern Europe, so growth is already kicking in.
The board of directors and early investors are a who’s who of tech, finance, and even media.
Veteran market analyst Frank Holmes is in there on the board, Harry Pokrandt, who ran Macquarie Capital Markets in Canada for thirty years, is the CEO. You’ve got tech entrepreneurs and VC guys and lawyers who specialize in crypto.. this thing is tooled up. Then, of course, you’ve got billionaire philanthropist Frank Giustra behind the scenes.
This is why/how the company is going public with a pro-forma market cap of $69 million.
Now, I know your next question, because it’s everyone’s next question; If Genesis is making all this money mining bitcoin, why do they need to bother with going public?
“This is a strategic opportunity for Genesis to access capital and build a bigger business publicly than we ever imagined building our first home-based Bitcoin mining machines five years ago,” says Marco Streng, who started the company.
I don’t have a deal with HIVE, but I think it’s a freaking gimme, so I bought in on the early financing and took down as much as I could. I like the group, I like the sector, I like that they’re not building something but buying into something already built and working. I like where it’s all going and I can tell from my incoming phone calls that the second half of 2017 is crypto-time.
As weed sits waiting for the government to figure out rules and energy metals wait for Elon Musk to turn the key on his gigafactory, crypto is where it’s at.
Imagine this: Scotiabank decides to move its financial network to a blockchain system, and tells customers that if they install their app on their phones and laptops as par of that system, verifying financial transactions in real time using previously unused CPU time, that they’ll earn an extra few percent on their savings accounts.
Imagine this: Someone uses blockchain to verify email senders to efficiently blot out spammers for good. Or someone uses blockchain to verify stock market trades or help academics research the best strains of weed to cure cancer.
Imagine in any of those, or thousands more scenarios, that you have the keys to a 700k square foot hangar filled with GPU racks, and can turn that sort of power onto that new system and profit directly, while your competitors are scratching around Craigslist to find GPUs..
This tech isn’t new. Hell, it was all the way back in the early 2000’s that someone had an idea to ask people to install screensavers that analyzed molecular combinations of cancer medicine, and millions of people did so – for free – including me. There’s a lot more unused CPU time in the world’s computers than there is utilized time. Now that there’s money to be made, just think how quickly this technology could take over everything.
With HIVE right there at the front.
Blcock