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MGT Capital Investments Inc (OTCMKTS:MGTI) Doubles Down On Crypto

MGT Capital Investments Inc (OTCMKTS:MGTI) Doubles Down On Crypto
Written by
Chris Sandburg
Published on
June 27, 2017
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Regular readers will know that MGT Capital Investments Inc (OTCMKTS:MGTI) is a stock that we have come back to pretty frequently over the last 12 months or so. It's one of those companies that, for better or for worse, cannot stay out of the headlines for long, with this omnipresence rooted primarily in the company's opinion dividing CEO, John McAfee.In our most recent coverage, we detailed a release put out by management associated with MGT's bitcoin mining efforts and the closing of a $1.35 million financing that would be used to fund the expansion of said efforts. As many reading will already be aware, bitcoin has increased dramatically in price over the last few months, and many companies in the public arena have benefited from this increase. Markets have looked for an alternative exposure to the rise in the price of the underlying asset and, just as we saw with the marijuana space at the end of 2016, a flurry of companies have rushed to claim some degree of linkage with bitcoin in an attempt to attract speculative volume.MGT is one of the few companies that actually has bitcoin related operations and that benefits directly from the rise in the price of the cryptocurrency. As per the latest release, the company has 400 Bitmain Antminer S9 units at work currently and is using the above noted raise proceeds to add a further 1000 units to this haul.1400 units should generate around 225 bitcoin monthly (as a reward for transaction processing on the bitcoin blockchain – check out this link if you are unsure as to what this means), which at current price (a little over $2400 per bitcoin) equates to just shy of half a million dollars a month in bitcoin-associated revenues. Given that the same number of miners would have generated just $172,000 this time six months ago, we see this as a nice bit of foresight by McAfee; and markets seem to agree – the company is up close to 50% on its end 2016 price.And this brings us to the company's latest release.At the end of last week, MGT announced its intentions to kick off a program that will see it start to mine Ethereum (ETH) and Ethereum Classic (ETC). These are two alternative cryptocurrencies, both of which derive from the same blockchain initially, but have since split into two separate coins by way of a fork last year. Outside of bitcoin, Ethereum is the coin most seen as likely to play an integral role in the technology space across the next 10 years, and we think McAfee is looking to capitalize on this potential just as he did with bitcoin, by getting in at the (comparatively) early stage of the mining side of the equation and loading up on coins in anticipation of a forward revaluation – similar to that which we've seen from bitcoin.So that is the latest release, how does this play into our forward thesis on the stock?As readers who have followed along with us on this one will know, MGT is working on the development of a so-called secure cell phone that – it hopes – can make some sort of dent in the US mobile device market. The company also has a suite of security products, most notably its Sentinel system, on the verge of hitting shelves.For us, however, right now, the majority of this one's valuation is rooted in its cryptocurrency efforts. We see McAfee's focus on Ethereum as a sort of doubling down on these efforts, and as such, we see the latest development as positive for our overarching thesis.Sure, there is a large degree of uncertainty associated with this company. As noted, McAfee is divisive and, for some, outright untrustworthy. To date, however, we've liked what we've seen and we're giving the company the benefit of the doubt as things stand.We'll stay on top of it the story develops and reevaluate our thesis as and when new inputs hit press.Keep an eye on BTCUSD here and ETHUSD here as an indication of the success or otherwise of McAfee's double down.Catch up on the whole MGTI story: read our previous coverage here.We will be updating our subscribers as soon as we know more. For the latest updates on MGTI, sign up below!Image courtesy of BTC Keychain via FlickrDisclosure: We have no position in MGTI and have not been compensated for this article.

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