Quantum Blockchain (LON: QBT) just had a rights issue, the result of which was that the shares dropped 23%. Well that's the sort of thing that happens in a rights issue. More shares are issued at less than the market price, the market price falls to account for the greater amount of equity in issue. The aim of the fundraise is, apparently, to: “....progress its research and development programmes, particularly the further development of its proprietary bitcoin mining machine learning algorithms and software product release,” and to be honest we're a bit mystified there. We don't claim to be omniscient so it is possible that we've overlooked someone. But we don't know of any listed company reliably and sustainably making money out of blockchain. The mining companies are being squeezed between falling Bitcoin prices and rising energy costs, the exchanges have a habit of going horribly bust and, well, other than that, what is there out there?
We suppose a few lawyers and accountants are getting paid but given the paucity of the advice the industry seems to be getting on those two points perhaps not many.
As you may have guessed by now we are cynics on the industry itself.
Quantum Blockchain share price from London Stock ExchangeWe are not cynics on the basic idea and what has been happening these past few years however. Stock markets exist to finance new ideas. Some of those new ideas go on to be highly profitable as well as world changing. Some don't - that's just the way new ideas work. However, in order to have an economy that advances, that continues to invent and then adopt new technologies we need to have the system whereby we investors speculate upon which of the new ideas will work. Therefore we're fine with fads and fashions that sweep through markets. Cryptocurrency was clearly and obviously a fad, a fashion. Which is, as we say, fine. For some of these work - the car - and some don't - faster than sound air travel.
That is to think of things at the system level. We also want to think of the same events at the individual investor level. At which point it's equally fine to invest in these fashionable bubbles on the way up. There are always the difficulties of knowing how far “up” is going to be but that's the same for anything. But then comes the other side of this - when it's obvious that a sector has peaked and likely isn't going to work out. We think blockchain has reached that point. Other than as a fun place to go speculate we don't see any profitable uses of crypto or blockchain. We may even be wrong in this. But that conclusion does lead us to the idea that shares like Quantum Blockchain are there to speculate in, not invest - and definitely not to put fresh cash into through rights issues.
