The Lemon Fool

Hello you very amazing and intelligent individuals that make up these forums. I sincerely hope things are going well for you.

I was kindly wondering i know if you have a manufacturing style business, whether that is alcoholic beverages, food, it can be easy to evaluate the business. It is often said that Biotechnology, Natural Resource companies, Banks and Cryptocurrency businesses need a special skill to analyse. I was very interested in a Cryptocurrency Mining company that has blockchain technology which Cryptocurrency uses. I please wondered if anyone knows how an realistic valuation could be carried out on a business like this please and how would the analysis be different from a standard manufacturing company please? If anyone kindly had any thoughts on this i would be forever grateful and thankful it would mean the world to me and be highly appreciated.

Sending you lots of good wishes and i truly hope your success in the markets investing continues. Very best wishes as always and hope you have a wonderful week. Take care.

robertbanking wrote:Hello you very amazing and intelligent individuals that make up these forums. I sincerely hope things are going well for you.

I was kindly wondering i know if you have a manufacturing style business, whether that is alcoholic beverages, food, it can be easy to evaluate the business. It is often said that Biotechnology, Natural Resource companies, Banks and Cryptocurrency businesses need a special skill to analyse. I was very interested in a Cryptocurrency Mining company that has blockchain technology which Cryptocurrency uses. I please wondered if anyone knows how an realistic valuation could be carried out on a business like this please and how would the analysis be different from a standard manufacturing company please?

Ok, I'll have a go.

It's impossible! Or at least incredibly difficult.
All the examples that you give are of things with a mature stable market. This is not the case with crypto. The market for their product is very young and very cut throat. Indeed profits from mining bitcoin will half, probably in in the first quarter of next year.

I say that as someone who owns bitcoin and is dependent upon such companies.

Even the example of Biotech, and yes I invest there, the risks can be understood and mitigated.

Ok, there are things that we can know about a crypto mining company. That is the expense stream in terms of the cost of electricity and non crypto income stream. One miner recently had a negative cost of mining, because their other income streams exceeded their mining costs. It is actually possible to be paid to consume electricity, or at least possible to pay a nominal amount for it. Those things should be dealt with in a given companies financial report.

However situations can change and likewise the risks should be in the company report.

I really don't think that there IS something like the discount model that can be applied to value this type of business. I'd recommend thinking in terms of speculation, rather than investment though. You know, like insurance companies guess upon events and hope to profit by arbitraging likelihood, rather than the certainty of a drinks business.

Thanks for posting though. I really must look into the possibility or investing myself.

Urbandreamer wrote:Indeed profits from mining bitcoin will half, probably in in the first quarter of next year.

Just an aside on that. The halving events reduce the block reward, but they also make bitcoins more valuable (Bitcoin's "anti-inflationary design"). This encourages miners to keep mining even after the halving happens.