Impact from El Salvador to our stocks: what has been happening with bitcoin?
16th September 2021 |
On 7 September 2021, bitcoin passed an important landmark on its road – along with crypto generally – to the mainstream in … El Salvador.
It became the first country to accept bitcoin as legal tender.
In other words, bitcoin is now an officially recognised medium of exchange in El Salvador – much in the same way that sterling is here in the UK.
On 6 September 2021, bitcoin’s price reached a three-month high of around $52,700.
However, the price came crashing down to below $44,000 the following day, or by more than 16%. At the time of writing, the price of bitcoin is roughly $48,000.
The adoption of bitcoin as legal tender in El Salvador has been anything but smooth, and contributed to the sudden drop in its price, and investors’ appetite for risk.
It has been met with strong protests, with uncertainty amongst Salvadorans surrounding how bitcoin transactions will actually work, and benefit their lives.
In addition, the government’s digital wallet system, known as the Chivo wallet, crashed following installation problems.
As El Salvador has shown, crypto’s road to the mainstream will not likely be an easy one.
Understandably, the latest events have created further skepticism towards bitcoin and a wave of unfavourable headlines.
So, what has been happening with the crypto-related stocks in our Frontier Tech Investor portfolio?
Argo blockchain (LSE: ARB), a cryptocurrency mining company, was trading at 143GBp on 6 September 2021. It then dropped around 9% to 130.80GBp on 8 September 2021. At the time of writing, it is 153.7GBp.
Mode (LSE: MODE), a digital assets payment platform, was trading at 41.20GBp on 6 September 2021. On 8 September, it closed at 41GBp. At the time of writing, it is 39.05GBp.
Equals (LSE: EQLS), an international payments platform with crypto liquidity, was trading at 57GBp on 6 September 2021. On 8 September, it closed at 56GBP. At the time of writing, it is 68.34GBp.
As you can see, recent events have had little impact!
We remain optimistic about the prospects for all three companies.
If anything, our outlook towards crypto is more positive than ever before.
The adoption of crypto started in the hands of individuals, it then moved into corporations. Now, for the first time, crypto has been adopted by a sovereign government.
As Sam has argued in a recent edition of Exponential Investor, another Southbank Investment Research publication, the events in El Salvador are important for another reason.
The use of bitcoin as a medium of exchange means that Salvadorans who are living and working outside the country and who want to remit money to their family and friends at home can do so much more cheaply than through the traditional payments industry.
Given the overall importance of remittances to El Salvador’s economy, this is a very positive development.
Each of Argo, Mode and Equals, in its own way, is helping crypto on the road towards the mainstream.
Buy list update
Ocean Outdoor (LSE: OOUT)
If ever you find yourself wandering through Piccadilly Circus in London, you will no doubt notice the huge 3D advertising screens in your line of sight.
They’re pretty mesmerising, and light up Piccadilly Circus.
You’ll be pleased to know that our digital advertising stock Ocean Outdoor, operates everything you see on those screens.
The company is an operator of premium advertising space in not only London, but across Europe.
Its half-year results reflect a solid period of trading.
For the six months ended 30 June 2021 (H1 2021), revenue increased 11.2% from H1 2020, rising from £36.5 million to £40.6 million.
The company is in the process of monetising advertising space, as footfall returns to leisure destinations (in which its displays are located) after the lockdown period.
Of note, the company was appointed outdoor media partner of St James Quarter in Edinburgh in May 2021.
St James Quarter is a highly prestigious shopping destination, in which Ocean will operate 35 big screens, and sell premium advertising space to customers seeking to appear on those screens.
We believe Ocean will continue to expand its presence across the UK and continental Europe, as the emergence from lockdowns continues.
We reiterate our ‘HOLD’ recommendation on the stock. You can find the original recommendation here.
Gfinity (LSE: GFIN)
Gfinity is a developer of software that hosts major eSports gaming tournaments.
On 8 September 2021, the company announced the acquisition of SiegeGG Corporation, its third acquisition in the space of nine months.
It follows the acquisitions of EpicStream, a fantasy and sci-fi streaming service in December 2020, and Stock Informer, a gaming stock checker, in August 2021.
SiegeGG is an operator of the website siege.gg, a leading website for statistics and analysis around popular shooting game Rainbow Six Siege.
Rainbow Six Siege currently has around 70 million users.
In the deal, Siege GG has become part of Gfinity’s digital media group (GDM) with immediate effect.
Gfinity will take control of the technology and its social platforms, including its website and twitter account which has 100,000 followers.
As part of the acquisition, the previous owners of Siege GG will be given 9 million ordinary Gfinity shares.
John Clarke, CEO of Gfinity, noted:
“Gfinity’s strategic focus is based on strengthening and growing ‘what we own’, in particular the Gfinity Digital Media group. We are excited to bring such a highly regarded website into the GDM…”
The acquisition with Siege GG will allow Gfinity to develop this popular gaming website, and monetise the platform using its expertise.
It’s one thing stating the intention to acquire another company. Actually going through with the acquisition and executing it, is another.
Gfinity has executed all three acquisitions over the past nine months.
It highlights Gfinity’s commitment to, and ability in, driving sustained business growth.
We reiterate our ‘HOLD’ recommendation. You can find the original recommendation here.
Meggitt (LSE: MGGT)
Meggitt has been involved in something of a bidding war over the past month.
It has drawn attention from two engineering conglomerates.
The first bid was from Parker-Hannafin on 2 August 2021, who put forward a takeover offer to buy all outstanding Meggitt stock 800GBp per share.
The second, albeit unsolicited offer came from TransDigm at 900GBp per share on 11 August 2021.
However, on 7 September 2021, TransDigm confirmed that it had pulled out in its bid for Meggitt, invalidating its slightly more lucrative offer in comparison to Parker-Hannafin.
As a result, Parker-Hannafin is now the only bidder left in the fray.
Whilst the deal is still yet to be completed, we recommend that you accept the original offer at 800GBp per share.
This is further upside of around 9% on the current share price at the time of writing. The reason for the discount is because the deal isn’t 100% guaranteed to be completed.
We will keep you posted on if/when the deal completes, with the appropriate action to take.
You should of course review all the information on the deal, via the company website here and via your broker.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Surface Transforms (LSE: SCE) – this is car braking technology like you have never seen before. The carbon ceramic brake discs from Surface Transforms are notable for their efficiency, providing up to 70% in weight savings. Surface Transforms is the UK’s only manufacturer of carbon ceramic brake discs for automotive use, meaning it has something of a niche market all to itself. The durability and smoothness of the brakes enhances the driving experience for all. It currently has a buy limit of 68GBp. Make sure you stick to the latest advice and check the current price before investing. You can find the original recommendation here.
Mode Global Holdings (LSE: MODE) – Mode looks to revolutionise the way in which payments are being conducted. Its platform provides a seamless way to manage, and spend assets from both monetary systems: the old, fiat currency system, and the new, crypto and digital assets system. The platform has unique features, such as the potential for you to earn interest on your bitcoin holdings. We see the popularity of Mode rising in line with the wider adoption of cryptocurrencies as a means of payment. You can find the original recommendation here.
Argo Blockchain (LSE: ARB)- Argo is a history-making crypto mining company. It is the first pure play crypto mining company to list on the LSE. Its listing on the exchange shows how quickly the transition to the new money system is taking ahold. Through its powerful mining rigs, the company has the capability to mine thousands of bitcoin each year, earning potentially lucrative returns in line with the price of bitcoin. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
