Earning Bitcoin dividends is a new phenomenon when it comes to blockchain technology and open finance. Today we give you an overview of what you can expect.
We are at a point where simply mentioning that a company is in association with cryptocurrency piques the curiosity of investors. Whether it be Bitcoin or blockchain technology, investors will come rolling in upon hearing those key words. And honestly, it would be difficult not to understand why. Since Bitcoin’s 2009 inception, there have been instances of those investing in digital currencies reaping many benefits afterward.
With over 5,000 cryptocurrencies on the market right now – and new ones on the horizon – this is an innovation that isn’t losing steam. Even though the crypto market is volatile, the potential lucrative rewards are too good to pass up on.
Now, the unpredictability of the market may hinder the excitement or interest some may have on investing in cryptocurrency. This is especially true when it comes to Bitcoin and that is largely thanks to the events of 2018. During this year, the coin went through various ups and downs; more of the latter than the former. It is hard not to understand why some are hesitant about Bitcoin investments or products that advertise Bitcoin dividends.
The fact is, timing is everything in the crypto world. Anyone who was foolish enough to buy Bitcoin AFTER the high-water mark is now underwater. Other major cryptos followed suit and that has a lot of people running for cover. Some are saying that cryptocurrencies are on their way out. Given all the ups and downs we’ve seen recently, it’s impossible to accurately predict what the price of Bitcoin will be even a few minutes from now.
However, in the end, it does not matter. There is a way to work around this and that method lies with ‘dividends’.
What is a Dividend?
A ‘dividend’ is basically a token reward that shareholders receive as payment for their investment in a company’s equity. Most of the time, it will originate from the net profits of the company. A majority of the profits reside within the company as earnings that are held on to. This is representative of the money for the company to use for current and future business activities alike. The remainder, however, can be assigned to the shareholders as a dividend.
From time to time, companies will administer dividend payments despite not making any adequate profits. They may do so as a method of preservation for their set track record of executing consistent dividend payments.
The board of directors possesses the ability to decide on issuing dividends over several time frames. In addition, with payout rates that differ greatly from one another. The payments of dividends can be set to a scheduled frequency. What this means is it can be done either on a monthly, quarterly, or annual basis.
Generally speaking, there are four important dates when it comes to dividends:
- Announcement date – The announcement of dividends by company management.
- Ex-dividend date – The date of the dividend’s eligibility expiration, which is alternatively ‘the ex-dividend date’ or simply ‘the ex-date.’
- Record date – The company’s cut-off date, determining which shareholders are acceptable enough to receive a dividend or distribution.
- Payment date – The date in which the issue of the dividend payment commences and when the money is credited to investors’ accounts.
The release of dividends can be accomplished in a wide variety of ways. They can either be as cash payments, stock shares, or any other property. Regardless of the options, cash dividends are prone to being the most common of the bunch.
Why do companies pay dividends?
The reasons as to why companies pay dividends are as plentiful as they are diverse. These reasons often have different implications and perceptions of investors.
Shareholders typically expect dividends as a reward for the trust they place on a company. In turn, the management of the company intends on honoring this sentiment. They aim to do so by way of supplying a strong track record of dividend payments. Dividend payments are essentially a positive reflection on a company and help in preserving investors’ trust.
Many shareholders have a preference for dividends. This is mostly because they are usually viewed as tax-free income for shareholders in an array of jurisdictions. Meanwhile, capital gains that come into being through the sale of a share whose price experiences an increase is taxable. Traders seeking short-term gains may also be in favor of receiving dividend payments that offer instant tax-free gains.
A high-value dividend declaration is often indicative of the company performing well and successfully generating good profits. However, it could also indicate that the company has a serious lack of suitable projects that result in better returns. For that reason, it is utilizing its cash to pay shareholders rather than reinvesting it into potential growth.
Crypto dividends: Mining
For the purposes of keeping this article on track, we won’t go into too much detail about the mining process. To give a brief summary, it is the way in which crypto-coins are generated. To produce a coin, a complex mathematical problem needs to be solved by ‘miners’. From solving a problem and generating a coin, miners actively make the network reliable. They also receive financial rewards in exchange for their efforts.
If you want more information about crypto mining – specifically bitcoin mining – read “What is Bitcoin Mining?”
When it comes to maximizing returns, particularly on crypto portfolios, mining immediately comes to mind. While this is not in the traditional sense of earning dividends, mining does indeed display some resemblances. Miners are investing in a specific cryptocurrency with the expectation of consistent returns.
However, the hardware and rigs for crypto mining can be quite expensive, as is the electricity necessary to run them. On top of that, they require a substantial amount of skills in coding and electronics to properly operate the mining activity.
In the midst of the bear market, many miners went through bankruptcy due to the drop in crypto asset prices. A majority of them would end up running their operations at an alarming loss. In the end, they have no choice but to acquire coins and wait for future profitable times. Mining can mimic dividends, though the unpredictability and the originality of the markets are important in the dollar value of the dividends.
Chips & Processors
It’s obvious that you need a sophisticated piece of equipment to solve complex mathematical problems in order to mine bitcoin. A supercomputer, so to speak. Taking this into account, there is one particular group that directly benefits from this arrangement. It is not necessarily the miners, though they do receive rewards for their work in the mining process. Instead, that specific group is the developers and creators of computer processors and chips.
Unsurprisingly, solving complex mathematical problems requires an excessive amount of power. In this era of technological advancements in various fields, powerful chips are the only way to achieve that. There are only a select few semiconductor companies that have what it takes to properly fill this increasing demand.
When it comes to the gold, there is one factor that comes as a surprise to all potential Bitcoin buyers. In fact, anyone showing an interest in purchasing any cryptocurrency will be surprised to learn this. Once they start familiarizing themselves with the field, they will see that the gold is actually not in the coins. Instead, the gold resides within the shares of the companies responsible for making the computer processors and chips that create digital currencies.
During the Gold Rush of 1849, American businessman and journalist, Samuel Brannan, had a peculiar plan in mind. He was not planning on digging for gold when he publicly announced it was in the “American River.” Instead, his plan was to sell shovels. This practice – as unusual as it may sound – is something one can do in crypto-mining.
How would that work? Mining for bitcoin is not like traditional mining; it is a digital procedure, after all. Well, the answer to this is you seek out the companies likely to produce the circuitry needed to power demand for the future. Whether it be the next five years, ten years, or maybe more. These are the ones that will supply the power for others to mine Bitcoin, Ethereum, and various other cryptocurrencies. When you identify the best companies, you snap up a piece of each one of them.
Through this, you won’t need to own the coins themselves. In lieu of this, you will take the safer and more reliable route that will lead you to substantial profits. In other words, through Bitcoin dividends.
The Semiconductor Supercycle
On top of constructing chips to power bitcoin mining machines, the semiconductor industry is undergoing something else. It is on the brink of receiving a huge lift from almost every major tech trend in existence. Its chips are capable of powering a wide range of technologies. These range from self-driving Tesla cars to Amazon’s and Microsoft’s cloud services. It even extends to machines that enable real-time virtual reality and gaming. This goes by the name of ‘the Semiconductor Supercycle’.
In 2019, the Semiconductor Supercycle hit a wall, with chipmakers feeling anxious at the cycle suddenly stalling. However, many predict that 2020 will put the supercycle back on track.
There are a lot of analysts who are of the belief that the supercycle is too good to be true. Contrary to that assumption, that is not the case. Take a moment to reflect on the commodity supercycle that spanned from 2000 to 2014. Wall Street analysts would go on to predict that the cycle was over. Moreover, resource and commodity stocks were signalling a plummet.
What those analysts missed was what was going on in China. Over there, they were rapidly industrializing in an extremely special event.
The emergence of smart products
Now, come back to the present-day. Wall Street analysts are starting to wake up and comprehend the powerful new Semiconductor Supercycle. “Smart products” (i.e. products with chips inside them) are gradually becoming pervasive in various aspects of our lives:
- Artificial intelligence/Robotics
- Internet of Things (IoT)
- Cloud computing
- Self-driving vehicles
These are only a few aspects; the list is extensive. All these technologies, as well as crypto-mining, require the latest generation of semiconductors. Taking all of this into account, it is easy to think that we are in the middle of something revolutionary.
BlockFi is one blockchain company that pays dividends – in Bitcoin. You simply have a Bitcoin ‘deposit’ account with BlockFi, and each quarter you receive a statement with your Bitcoin dividend earnings. They work very similarly to other dividends in that they can be reinvested automatically – only in this case, the investment is in more Bitcoin!
Blockchain investments for Bitcoin Dividends
If you are looking to invest in bitcoin, it’s likely you will feel a little nervous about direct investment. However, there is an alternative: investing in blockchain technology. But which stocks should you keep a close eye on? Well, three of the best stocks pertaining to blockchain technology to take into consideration are:
- Bank of America – Along with IBM, Bank of America possesses the largest blockchain patent portfolio of any company existing on the market. Not too long ago, they started to hire for blockchain positions. Seeking employees who specialize in this business is an indication that the finance company is a strong blockchain bet.
- Mastercard – The downside is evident. Blockchain technology has the potential to make Mastercard’s current business model obsolete. Be that as it may, there is still an upside to this. The company is aware of this and is taking initiative, like creating APIs for blockchain app developers.
- Fujitsu – The top Japanese information technology services provider, as well as the 7th largest one in the world. It recently launched the Blockchain Innovation Center in Brussels, Belgium.
If you want to learn more earning crypto dividends, read “How to earn Crypto Dividends.”