As Crypto Heats Up, APLD and BLQC Catch Fire on Hosting Theme (MARA, SI, BTBT, HUT, COIN, MSTR)

Cryptocurrencies

Bitcoin has been a relatively reliable leading indicator of risk appetite across global assets over the past year, leading Ark stocks and the Nasdaq in several major turns, both up and down. (1, 2)

With Bitcoin now up about 25% in the past week (3), investors have some reason to cheer up.

While that may bode well for the broad risk-on side of the global financial puzzle (4), it naturally bodes even better for key players in the cryptocurrency space, including Marathon Digital Holdings Inc. (Nasdaq:MARA), Silvergate Capital Corp. (NYSE:SI), Bit Digital Inc. (Nasdaq:BTBT), Hut 8 Mining Corp. (Nasdaq:HUT), Coinbase Global Inc. (Nasdaq:COIN), and MicroStrategy Inc. (Nasdaq:MSTR).

Many of these names are either directly or indirectly involved in mining cryptocurrency coins. And they have all been brutalized so far in 2022 and likely carry very little in the way of speculative “bag holders” after such deep and persistent selling. (5)

MARA, for example, declined from more than $80/share last fall to as low as $5.20/share earlier this month. But, thanks to the turnaround in BTC, MARA is now already almost three times that price per share as of this writing, closing Tuesday’s action at $12.90/share. (6)

However, under the surface of this technical price drama is another story quickly poising itself for the spotlight: hosting stocks.

“Hosting” in the crypto mining space is the concept of developing power and mining capacity resources and then signing contracts with other mining outfits to allow them to use those resources for a fixed fee. The advantage is that it grants exposure to the long-term cryptocurrency growth theme without income being directly tied to day-to-day fluctuations in the price of cryptocurrencies. (7)

Two speculative names with strong ties to this theme have taken flight this week: Applied Blockchain Inc. (Nasdaq:APLD) and BlockQuarry Corp. (OTC US:BLQC).

 

Applied Blockchain Inc. (Nasdaq:APLD) bills itself as a builder and operator of next-generation data centers across North America, providing substantial computational power to blockchain infrastructure and Bitcoin mining.

The Company has partnered with some of the most recognized names in the industry to develop, deploy, and scale its business.

Applied Blockchain Inc. (Nasdaq:APLD) most recently announced a five-year hosting contract with Marathon Digital Holdings, Inc. for 200-Megawatts (“MW”) of Bitcoin mining capacity. The Company will provide comprehensive hosting services for Marathon’s Bitcoin miners at Applied Blockchain’s owned and operated co-hosting datacenters.

“This new agreement with Applied Blockchain is instrumental in helping us achieve our target of 23.3 exahashes per second of compute power for Bitcoin mining in 2023,” said Fred Thiel, Marathon’s chairman and CEO. “Wes and his team have proven themselves to be capable builders and operators of large-scale datacenters. Their expertise in hosting and mining operations complements our asset-light strategy, freeing up resources and allowing us to efficiently scale Marathon as one the leading Bitcoin mining companies in North America. We look forward to working alongside Applied Blockchain to install miners and achieve our growth targets.” (8)

If you’re long this stock, then you’re liking how the stock has responded to the announcement. APLD shares have been moving higher over the past week overall. But most of those gains came yesterday, as the stock soared 100% higher during the session, with more than 130 million shares changing hands. (9)

Applied Blockchain Inc. (Nasdaq:APLD) CEO Wes Cummins stated, “Partnering with Marathon, one of the largest Bitcoin miners in the industry, represents a significant step forward in Applied Blockchain’s growth trajectory. The multi-year agreement validates our capabilities as a best-in-class co-hosting datacenter operator. We are continuing to grow our contracted hosting capacity, which provides predictable revenue over a multi-year time frame. Additionally, demand for our hosting services remains robust despite the volatility in the cryptocurrency markets, giving us continued confidence in the growth potential of our business for fiscal 2023 and beyond.”

 

BlockQuarry Corp. (OTC US:BLQC) is another interesting speculative play in the crypto mining hosting narrative that has exploded higher this week. The most important partnerships the company has put together include Bit5ive LLC, North America’s largest provider of collective management services and mining equipment, and Bitmain Technologies, the world’s leading producer of cryptocurrency mining hardware and a leading global cryptocurrency mining firm. (10)

The upshot is the company’s high-performance self-contained POD5 mining pods and its current project to pair 56,000 Bitmain mining rigs with 200 megawatts of power. According to a recent update from the company, following the full deployment and activation of all 200 MW of power, BlockQuarry plans to further increase its facility to 500 MW of power, allowing for a significant further expansion in hosting and mining potential. (11)

BlockQuarry Corp. (OTC US:BLQC) shares have exploded higher this week likely in sympathy with APLD’s move off its deal with MARA as investors speculate on the potential for more hosting revenues to line up for BLQC.

But, even without new deals being announced, the company has posted good growth data and would seem to be on pace to announce another strong quarter for Q2.

The company recently announced financial and operational performance highlights for the twelve months ended December 31, 2021, as well as the full launch of the Company’s Phase One 20MW hosting infrastructure at its Southeast U.S. cryptocurrency mining site, which will drive approximately $9.5 million in annual revenues going forward. (12)

Revs were up 1,643% on a year-over-year basis, cash increased 540% year over year, total assets increased 5,965% year over year to $10.8 million, and total net income was $3.55M, improving from a loss of ($26M) in 2020 – a rather astounding shift in one year.

BlockQuarry Corp. (OTC US:BLQC) President and Chair Alonzo Pierce noted, “2021 was a breakthrough year for the Company, and the investments we made during that period are already starting to pay big dividends as we begin to collect on the implementation of our Phase One hosting infrastructure. The topline exploded higher last year, and the bottom line is set to swing in our favor sharply as we get past our major fixed costs.”

Shares of BLQC are up over 100% this week. (13)

 

References:

  1. https://www.forexlive.com/Cryptocurrency/bitcoin-breakout-bodes-well-for-25000-and-beyond-20220719/
  2. https://www.cnbc.com/2022/06/13/bitcoin-could-be-leading-equity-markets-lower-as-a-risk-appetite-gauge.html
  3. https://www.tradingview.com/chart/?symbol=COINBASE%3ABTCUSD
  4. https://blockworks.co/crypto-is-more-correlated-with-tech-stocks-than-ever-how-do-we-decouple/
  5. https://fortune.com/2022/07/01/horror-story-charts-first-half-2022-stocks-crypto/
  6. https://www.tradingview.com/chart/?symbol=NASDAQ%3AMARA
  7. https://www.datacenters.com/news/what-does-bitcoin-miner-hosting-mean-step-by-step-guide-to-choosing-the-best-min
  8. https://finance.yahoo.com/news/applied-blockchain-secures-200-megawatt-200500924.html
  9. https://www.tradingview.com/chart/?symbol=NASDAQ%3AAPLD
  10. https://www.globenewswire.com/en/news-release/2021/04/23/2215989/0/en/ISW-Holdings-Announces-Participation-at-the-H-C-Wainwright-Cryptocurrency-Blockchain-FinTech-Conference-on-April-27.html
  11. https://www.globenewswire.com/news-release/2021/09/07/2292452/0/en/ISW-Holdings-Will-Host-56-000-Miners-In-Recent-Partnership-Agreement-with-Bitmain.html
  12. https://www.otcmarkets.com/stock/BLQC/news/BlockQuarry-Completes-Phase-One-20MW-Launch-5600-Miners-Now-Online-Driving-95M-Annualized-Revs-2021-Audited-Financials-F?id=353592
  13. https://www.tradingview.com/chart/?symbol=+OTC%3ABLQC

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.