The Sirius Minerals PLC (LON:SXX) (SXX.L) share price has halved in the last 18 months. Investor sentiment has declined significantly even though there has been a lack of particularly negative news flow.
While disappointing and highly volatile, the stock has not performed as badly as Bitcoin of late. The virtual currency has fallen from over $19k in December to trade as low as $8k in recent days. Sure, it may be up significantly from its $1k level at the start of 2017, but that is not a great deal of use if you invested in recent months.
However, both Sirius Minerals and Bitcoin do share a common theme. Both are valued almost entirely on their future prospects. In the case of the mining company, it is not due to produce any POLY4 fertiliser until 2021. Therefore, investors are betting that it will eventually be able to generate a profit and even dividends further down the line.
Bitcoin may be accepted by some companies in return for the exchange of goods and services. However, its valuation is largely linked to its potential to become either a replacement for traditional currencies, or its use as an alternative investment. In other words, it has limited real-world application in my view.
For me, Sirius Minerals is less risky and has a much more appealing future outlook than the cryptocurrency. It has detailed forecasts and a clear path to future growth. It may not be producing any fertiliser just yet, but it is on track to do so in a few years’ time. In contrast, the future for Bitcoin seems highly uncertain and it is difficult to see a clear catalyst to push its price higher.
Therefore, with the mining company now trading at more than 90% lower than its project NPV, I feel it has an appealing risk to reward ratio. Bitcoin, though, seems riskier and more difficult to judge in terms of potential rewards in my opinion.