Bitcoin Stocks: The ‘Heads You Win, Tails You Win’ Portfolio (RIOT, ISWH, SQ, HIVE, PYPL, OSTK, MSTR, MARA)

While skepticism on Bitcoin and the cryptocurrency space remains in place – which is healthy for the continuing bull market trend in the space – the group and theme face an interesting potential dynamic that could drive its next leg higher: we have seen outperformance in both “risk off” and “risk on” periods.

Another way to paint this picture is to point out that Bitcoin has been correlated with growth stocks when growth stocks have been in favor and correlated with bonds and gold when volatility emerges. 

A good example is when Bitcoin moved 30% higher during the stock market crash of spring 2020, when the pandemic first reared its ugly head, and then rallied even more while stocks recovered during the summer and fall that followed.

Now, as we see volatility pick back up in the stock market as the US recovery hits a soft patch – which certainly showed up in Friday’s big miss on the jobs front – Bitcoin is running again.

Crypto is emerging as the ‘Heads You Win, Tails You Win’ portfolio tool, which is why we take a closer look at some of the key players in the space below.

Paypal Holdings Inc (NASDAQ:PYPL) helped to drive the breakout in the crypto space last year when it announced it would start to deal in BTC and allow customers to convert and purchase in the coin.

That step was explosive given Paypal’s growth as a payment platform because it basically widened BTC’s applied utility as a medium of exchange by billions of dollars in economic breadth overnight – even if a merchant doesn’t accept Bitcoin, it may accept Paypal, which means it suddenly accepted Bitcoin in a de facto sense.

Paypal Holdings Inc (NASDAQ:PYPL) recently announced that it has agreed to acquire Paidy, a leading two-sided payments platform and provider of buy now, pay later solutions in Japan, for ¥300 billion or approximately US$2.7 billion, principally in cash. The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country.

“Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizable two-sided platform of consumers and merchants,” said Peter Kenevan, vice president, head of Japan at PayPal. “Combining Paidy’s brand, capabilities and talented team with PayPal’s expertise, resources and global scale will create a strong foundation to accelerate our momentum in this strategically important market.”

Even in light of this news, PYPL hasn’t really done much of anything over the past week, with shares logging no net movement over that period. 

Paypal Holdings Inc (NASDAQ:PYPL) managed to rope in revenues totaling $6.3B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 21%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($12.4B against $41.3B, respectively).

ISW Holdings (OTC US:ISWH) is the “new kid on the blockchain” with huge growth starting to emerge over the past year seemingly out of nowhere. The stock is also clearly the hottest in the space over the past several months as the crowd starts to find it down on the OTC. We would also note that the company has recently made statements hinting toward an uplist onto the Nasdaq given its recent jump in revenues and forward outlook.

Overall, shares have more than tripled in the past month as the company nails down game-changing partnerships including its landmark deal with Bitmain – probably the most important crypto company in the world – as announced in July.

ISW Holdings (OTC US:ISWH) hit another key benchmark recently as it surpassed agreed upon milestones related to the performance of its common stock price, allowing it to receive an additional 150 Bitmain S19 95TH/s miners from Minerset, a Delaware LLC, due to negotiated terms in its asset purchase agreement announced in August.

The company can trigger another milestone with further gains, creating a potential positive feedback loop as its shares move higher, boosting its mining capacity with no additional financial draw on cash reserves.

“This contract was a win for both companies: We didn’t have to part with $3.8 million in cash and Minerset was able to quickly move its inventory,” noted its president, Alonzo Pierce. “With the appreciation of our stock price, both companies have already been amply rewarded for this partnership.”

ISW Holdings (OTC US:ISWH) Pierce also noted in a recent release that the company’s Q3 and Q4 data were on a very encouraging glide path: “We will unquestionably log our best quarter in Company history – by a wide margin – when the books close at the end of the month [of September]. But that will likely be dwarfed by what rolls in over coming quarters. We have made a few final adjustments and updates that are being implemented right now that will take us to full capacity in terms of achievable hashrate in Pennsylvania. That will bring us to a topline run-rate of approximately $1.5 million per month, which may double again beginning midway through the fourth quarter as we begin to ramp up hosting revenues.”

HIVE Blockchain Technologies Ltd (NASDAQ:HIVE) recently moved up onto the Nasdaq as an emerging leader in the crypto mining space, so it represents an interesting barometer for investor enthusiasm for stocks in the space, generically.

According to its own materials, the company engages in building a bridge from the blockchain sector to traditional capital markets. It also involves the production of mined cryptocurrency assets such as Ethereum. Its projects include Iceland-based Cryptocurrency Mining.

HIVE Blockchain Technologies Ltd (NASDAQ:HIVE) recently announced its results for the full year ended March 31, including news that its income from digital currency mining was $66.7 million this fiscal year, a 174% increase from the prior year. In addition, the company saw record net income of $42.5 million, up significantly from a loss of $1.9 million a year earlier, and $2.9 million lower than the previous quarter. Gross mining margin expanded to $50.1 million, from $8.5 million last year, and is $17.1 million higher than that experienced in the prior quarter of $10.6 million. Net income per share grew to $0.12 from a loss of $0.01 during the prior year and is $0.01 lower than the previous quarter of December 31, 2020.

“Fiscal 2021 was an incredible year for HIVE. Despite the effects of COVID-19 we have achieved record results and continued to increase our Ethereum and Bitcoin mining capacity,” said Frank Holmes, Interim Executive Chairman of HIVE.

And the stock has been acting well over recent days, up something like 5% in that time. 

HIVE Blockchain Technologies Ltd (NASDAQ:HIVE) managed to rope in revenues totaling $45.7M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 401.5%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($145.8M against $11.9M).

Other interesting names in the Crypto Stocks space include Riot Blockchain Inc (NASDAQ:RIOT), Square Inc (NYSE:SQ), Overstock.com Inc (NASDAQ:OSTK), MicroStrategy Incorporated (NASDAQ:MSTR), and Marathon Digital Holdings Inc (NASDAQ:MARA).

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).