Update - April 19, 2022

Silvergate Jumps on Good News

For the past decade, it’s been one of the hottest sectors on the planet.

It’s rewarding us once again today.

How money moves from one hand to another is big – and good – business.

Mastercard, Square, PayPal and just about everybody else in the processing game have done very well. But now they’re starting to set their sights on another rich target.

And we’ve been all over it.

It creates an ideal way for conservative investors to tap into a speculative asset class.

Doing some digging this week, we see some of the big boys in the credit card processing realm are pushing themselves out of the traditional and into the modern.

Last year, Mastercard said it was launching a crypto-based payment system in Asia. Visa set up a team specifically dedicated to crypto. And now just about everybody in the industry is starting to turn to a hot derivative of the crypto world… the metaverse.

It’s quite exciting.

On April 4, Mastercard quietly filed for 15 crypto- and metaverse-related trademarks. They include everything from an app to help create NFTs (and an NFT marketplace) to virtual credit cards that can be used in the metaverse.

A bit more pragmatically (at least right now), the company also applied for a trademark for its plans to create downloadable music files that can be backed up by NFTs.

And it’s not just Mastercard.

American Express is in on the action as well. It just applied for protection for its own virtual marketplace. It is looking to do everything it does in the real world in the virtual world – including travel bookings and entertainment. It, too, has asked for a trademark on a logo for its NFT-trading platform.

Few folks are surprised by the news. After all, there’s big money at stake.

JPMorgan Chase says the metaverse could soon be worth $1 trillion in sales each year. Goldman Sachs goes even further, saying the metaverse could be an $8 trillion investment opportunity.

The numbers are huge.

For conservative investors, names like Visa and Mastercard offer a low-risk entrée to the sector. But they are long-term plays, and their exposure to the metaverse, especially at this early stage, is low.

There are better ways to play this quickly growing trend.

For instance, there’s my latest recommendation… Decentraland (MANA). It’s one of the most popular cryptos on the market these days and an early leader in all things metaverse. It has an immense head start on the competition.

But it’s a crypto. And even though it’s one of the more conservative plays in the sector, it’s hardly a widow-and-orphan play.

For a bit less risk, look to another of our portfolio entries, Silvergate Capital (SI).

It’s having a heck of a day.

It just creamed Wall Street’s estimates. The best-guess figure for quarterly profits was $0.46 per share. But Silvergate did better… much better. It posted a per-share profit of $0.79.

If you recall, Silvergate is a traditional bank – with quite a stinger.

It’s one of the premier banks for the crypto industry. And its crypto ties are paying off.

The number of digital customers on its roster finished the first quarter at 1,503, up from 1,104 a year ago. Better yet, the deposits from those customers jumped from $13.3 billion at the end of 2021 to $14.7 billion.

Clearly, the bank remains at the center of all things crypto.

And proving that it’s going after the big dogs of the industry, Silvergate is quietly adding to its portfolio of businesses. Over the last three months, it launched a fresh exchange network in Europe and acquired the Diem Group, a firm known for its blockchain-based payment technology.

After the news hit this morning, shares of Silvergate surged 8%.

Bottom line, if you’re looking for a “Goldilocks” way of playing the crypto sector that isn’t too conservative or too speculative… Silvergate is an ideal opportunity.

Big things are happening in the sector. And this bank is right in the middle of the action.

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