AMD and the death of the crypto-mining GPU

(AMD stock and its options are extremely liquid as AMD is one of the top 10 most traded stocks.)

Previously, I’ve written about how AMD’s profitability has been inflated by the cryptocurrency bubble.  This will likely come to an end in the coming quarters as the market for video cards will shrink thanks to the emergence of ASICs for top cryptocurrencies.  We are already seeing the effects of this as prices of video cards continue to normalize at the retail level.  From PC Part Picker:

Most investment bank analysts anticipate that AMD’s earnings will go to the moon.  While that type of behaviour may help their employer earn underwriting profits if AMD chooses their employer for an equity raise, these optimistic projectons are unlikely to materialize.

I/B/E/S estimates for AMD, courtesy of Sentieo.

In my opinion, AMD is a compelling short as its earnings will likely shrink rather than grow in the coming quarters.

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Bitcoin explained in plain English

Like Paypal and Visa, Bitcoin is a system that can send money digitally.  The innovation that sets Bitcoin apart is that it isn’t controlled or operated by a single company.  Instead of having a company like Visa run the system, anybody can join the Bitcoin network and participate in the record keeping that keeps Bitcoin running.  Nobody owns the Bitcoin software or the Bitcoin network.  If an oppressive government wants to shut down Bitcoin, it can’t simply go after a single company.  An oppressive government would (in theory) have to go after everybody running Bitcoin server software on their computer to shut it down.

In practice, the decentralization doesn’t actually work.  Most people buy Bitcoins through exchanges run by private companies, which are subject to government-imposed laws and regulations.  While Bitcoin’s innovation is interesting, it doesn’t actually do anything useful in the real world.  However, very few people actually understand Bitcoin.  So, journalists and cryptocurrency fanatics can make up fancy stories about how Bitcoin or other cryptocurrencies will change the world.

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Some ways to short Bitcoin

The price of Bitcoin has fallen significantly from its peak… perhaps foreshadowing a quick collapse.  Perhaps short positions in Bitcoin will work out quickly.  But who knows… short positions may turn out to be extremely dangerous as Bitcoin may skyrocket even more.  Here are some quick notes…

For the image above, the columns are:

  1. Ticker
  2. Green = shortable, dark green = no borrow, red = Interactive Brokers won’t let you short it.
  3. Borrow rate (retail rates).

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