Over the last twelve months, John McAfee has slowly but surely been turning MGT Capital Investments Inc. (OTCMKTS:MGTI) into a cryptocurrency stock. As far back as September last year, the company was releasing PRs detailing the construction and implementation of a bitcoin mining facility. At the time, the digital currency was trading in and around $1000. Many saw this as an effort to divert market attention away from the lack of progress in its then-core efforts to bring a security software to market and, for this reason, the bitcoin press releases often translated to a degree of weakness in share price as and when they hit press.
Fast forward to today and bitcoin is trading above $3500 and mainstream media is scrambling to cover the meteoric rise, while public companies are scrambling similarly to tie their operational efforts to the digital currency in an attempt to draw speculative volume from traders.
During this period, we have repeatedly highlighted MGT as a company to keep an eye on. We saw that bitcoin was on the rise and we suggested that McAfee claiming an early stake in the field (early, that is, in the sense that at-that-time that bitcoin was very much a fringe asset) could be a solid anchor on which to stake a bull thesis.
Since then, and in line with McAfee’s efforts to align the fortunes of MGT with that of the cryptocurrency space, the company’s share price has mimicked the underlying price of bitcoin. As bitcoin has risen, so has MGT. When bitcoin corrected back in May, so did MGT.
Subsequent to this last correction, we pointed out to our readers that this was a company they should keep one eye on. At that time, MGT traded for around $0.50 a share. At the most recent close, the company went for $1.30, down slightly on highs reached in July, in around $1.50.
So what’s next?
Once again, and as per this announcement, McAfee is attempting to get ahead of the crowd and, once again, we see this as a reasonable point on which a trader could base a long position. The announcement we just linked to refers to the company’s efforts to mine Ethereum, which is a crypto currency that’s rooted in a different chain than is bitcoin, but that could eventually become as, if not more, important in the space than bitcoin is right now. Ethereum is expected to form the root of what are called smart contracts, which unlike bitcoin (which is the currency type asset) could be applied to a huge range of commercial and private interests. When people say that bitcoin could be used in finance or law or art dealerships, all that sort of thing, they’re talking about blockchain not bitcoin. Further, there talking specifically about the sort of blockchain setup on which Ethereum rests. Smart contracts.
That’s where the real global growth is likely to come from over the coming decade or so and it looks as though McAfee is seeking to stake an early claim in this growth, just as he has done with bitcoin over the last year.
As ever, this sort of crypto type exposure brings with it an inherent risk – if the bitcoin price starts to crash, something that many are claiming is just around the corner (but then again, they have been claiming this for the last five years), companies like MGT will also crash. So long as bitcoin remains buoyant, however, there is plenty of return on offer near-term as the company tracks the price of bitcoin and then longer-term as this technology pushes into the mainstream and becomes a mainstay of commercial activity.
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Image courtesy of Marco Verch via Flickr
Disclosure: We have no position in MGTI and have not been compensated for this article.