As Bitcoin finds support at a confluence of $7,500/coin and the 200-day moving average, and then gets a strong boost from Chinese Leader for Life, Xi Jinping, Bitcoin stocks are suddenly back in focus as a legitimate point of interest.
While you can simply buy Bitcoins in one form or another, our analysis suggests that a far more explosive strategy is actually to buy Bitcoin stocks when Bitcoin prices surge. In many cases, a 10%, 20%, or 30% rip in BTCUSD can often produce 100%, 200%, or even 300% gains in related small and micro-cap stocks in the space as a correlated phenomenon.
This is because the stocks in the space are often left for dead when BTC is weak, so operational gains made in the interim go unappreciated by the market. Then, when the spotlight hits the space again, there’s a lot of ground to make up.
Here are five ways to play the space as things start to heat up again: Grayscale Bitcoin Trust (Btc) (OTCMKTS:GBTC), Overstock.com Inc (NASDAQ:OSTK), GD Entertainment & Technology Inc. (OTCMKTS:GDET), Marathon Patent Group Inc (NASDAQ:MARA), and MGT Capital Investments Inc. (OTCMKTS:MGTI).
Grayscale Bitcoin Trust (Btc) (OTCMKTS:GBTC) has launched higher along with the key digital currency following positive commentary on cryptos from Chinese officials. Most centrally, China’s president Xi announced that the world’s second largest economy plans to invest in blockchain technology as a digital currency solution.
GBTC can be used as a proxy for bitcoin trading on the long side. It is very difficult to get a “locate” on for shorts, but lately shorting hasn’t been the best idea. The BTC market has been on a fresh tear. As noted above, there are technical catalyst in play here as well, including confluence between the 7500 level and the 200-day MA.
Grayscale Bitcoin Trust (Btc) (OTCMKTS:GBTC) bills itself as a private, open-ended trust that is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. It enables investors to gain exposure to the price movement of bitcoin without the challenge of buying, storing, and safekeeping bitcoins.
The BIT’s sponsor is Grayscale Investments, a wholly-owned subsidiary of Digital Currency Group.
Each BIT share represented ownership of 0.1 bitcoins initially. The trust will not generate any income and regularly sells/distributes bitcoins to pay for its ongoing expenses. Therefore, the amount of bitcoin represented by each share gradually declines over time.
Overstock.com Inc (NASDAQ:OSTK) recently announced that interest from shareholders, broker-dealers, regulators, and the general market surrounding the company’s innovative Series A-1 dividend remains high.
According to the release, “Overstock continues to work and consult with regulators to ensure the dividend is implemented in compliance with applicable laws and corporate requirements, and as a result believes it will significantly enhance the benefit to its shareholders. Overstock will seek shareholder approval to facilitate the issuance of the digital Series A-1 dividend by eliminating current restrictions on the Series A-1 shares so the dividend can be held and traded by a wide group of investors and by reallocating the authorized preferred stock among series to pay the dividend on a 1:10 basis.”
Overstock.com Inc (NASDAQ:OSTK) bills itself as a an online retailer and technology company based in Salt Lake City, Utah.
It’s leading e-commerce website sells a broad range of new products at low prices, including furniture, décor, rugs, bedding, home improvement, jewelry, and more. The online shopping site, which is visited by nearly 40 million customers a month, also features a marketplace providing customers access to millions of products from third-party sellers.
Overstock was the first major retailer to accept cryptocurrency in 2014, and in the same year founded Medici Ventures, its wholly-owned subsidiary developing and accelerating blockchain technologies to democratize capital, eliminate middlemen, and re-humanize commerce.
“I’m frustrated with this delay, but these adjustments are necessary to enable all shareholders to benefit from the digital dividend,” said Overstock CEO Jonathan Johnson. “This is an important step for the first dividend of its kind to give our shareholders access to the next generation of capital markets powered by tZERO.”
Recent action has seen 9% during the past month in terms of shareholder gains in the company. Furthermore, the name has registered increased average transaction volume recently, with the past month seeing 21% over the long run average.
Overstock.com Inc (NASDAQ:OSTK) generated sales of $373.7M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 1.6% on the top line. OSTK is pulling in trailing 12-month revenues of $1.6B. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -22.6%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($125.9M against $203.8M, respectively).
GD Entertainment & Technology Inc. (OTCMKTS:GDET) is a diversified blockchain and crypto play in its own right. The company has a crypto ATM business, an elegant card-based cold-storage system for crypto assets, and a major bitcoin mining farm in New Jersey that just announced a move to dramatically expand operations following the signing of a material Asset Purchase Agreement for the acquisition of significant new and used Bitcoin mining assets to be immediately integrated into the company’s active cryptocurrency mining operations.
In fact, GDET operates in two basic segments: blockchain and CBD-based products. Both segments are currently doing real business and will likely contribute to significant revenue growth over the next 3-month and 12-month periods based on company data. But we are focusing on the Blockchain segment here.
“We are expanding and optimizing production from our mining operation at a rapid pace,” commented Anil Adnani, CEO of GDET. “This planned expansion follows a series of steps in Q2 and Q3 to dramatically lower our all-in costs through improved negotiated rates with utility providers and significant firmware upgrades. Any notable increase in the price of Bitcoin following this expansion in production at our mining facility should translate into substantial top and bottom-line growth for our shareholders.”
GDET is currently operating a large number of ASIC Bitcoin Miners at its primary New Jersey mining facility, with plans in place to move toward full fleet operation over the near term. In addition, the company has begun the process of a major planned expansion of this fleet.
The latest news represents a jump of 24% in terms of immediate Bitcoin production yield. The move is part of a larger expansion strategy geared toward augmenting shareholder value as the company prepares for higher cryptocurrency exchange rates and wider mainstream adoption.
In addition, the company’s expansion in mining capacity follows significant optimization steps taken earlier this year, including a sharp reduction in all-in utility costs (annual energy savings of as much as 41%) and an upgrade in unit-level system performance leading to a powerful increase in hashrate-per-unit-power consumption and sharply augmented system-wide security.
“Individuals and firms that made substantial hardware and technology investments in order to mine cryptocurrencies when Bitcoin was trading well above its present levels are now providing an advantageous secondary market for state-of-the-art hardware,” continued Mr. Idnani. “We have predicated our Mining Segment strategy on the assumption that we would have an opportunity to dramatically expand mining capacity at reduced costs. That opportunity is now in play, and we have negotiated equipment acquisitions accordingly. This step should put the Company in an extremely advantageous position to capitalize on subsequent improvements in BTC exchange rates.”
Shares of GDET have shown more upside off of the stock’s October lows than any other stock in this list during the BTC October rally.
Marathon Patent Group Inc (NASDAQ:MARA) recently announced that it has begun to deploy its recently acquired 6,000 S-9 Bitmain Antminers.
According to the release, the first Miners are being installed under a hosting agreement with Compute North at its new 100MW site in Nebraska. The company selected Compute North because of its strategically located facilities which provide lower cost renewable energy with a high level of reliability and security.
Marathon Patent Group Inc (NASDAQ:MARA) bills itself as a company that focuses on mining digital assets. It owns cryptocurrency mining machines and a data center to mine digital assets. The company was formerly known as American Strategic Minerals Corporation and changed its name to Marathon Patent Group, Inc. in February 2013. Marathon Patent Group, Inc. was incorporated in 2010 and is headquartered in Las Vegas, Nevada.
Marathon is a digital asset technology company that mines cryptocurrencies, with a focus on the blockchain ecosystem and the generation of digital assets. We currently operate one mining facility in Quebec.
According to company materials, “Marathon Patent Group is a patent and patent rights acquisition and licensing company. We acquire patents and patent rights from patent holders ranging from individual inventors to Fortune 500 companies. Our strategy of acquiring patents that cover a varied scope of subject matter allows us to achieve diversity within our patent asset portfolio. We generate revenue with our diversified portfolio through actively managed concurrent licensing campaigns. This approach is expected to result in a long-term, diversified revenue stream.”
The stock has bounced back after a dive earlier this month, helped by the sharp BTC rally.
Marathon Chairman and CEO, Merrick Okamoto stated, “This deployment of our recently acquired Miners and redeployment of our existing Miners will establish a very low-cost operation while substantially increasing the company’s cash flow.”
Marathon Patent Group Inc (NASDAQ:MARA) generated sales of $356K, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 54.2% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($1.7M against $2.3M, respectively).
MGT Capital Investments Inc. (OTCMKTS:MGTI) recently provided an operating update to investors, including a sense of where things stand relative to its key milestones.
According to the release, “the company has begun Bitcoin mining at its fully owned and operated facility in LaFayette, GA. While we await delivery of our previously ordered next generation miners from Bitmain, we have begun mining using a newly designed container solution with a capacity of 456 Bitmain S9 miners. In addition to energizing the first transformer to power this first container, phase one of the site is on track and on budget. Most property improvements, such as access roads, security fencing and underground high voltage electrical feeder lines are at or near completion. The other four transformers are on site along with the associated concrete vaults and pads.”
MGT Capital Investments Inc. (OTCMKTS:MGTI) is a chronic beneficiary of enthusiasm coming into the Bitcoin space. The company officially engages in bitcoin mining.
According to its materials, in September 2016, MGT commenced its Bitcoin mining operations in the Wenatchee Valley area of central Washington. Throughout 2017 the company expanded its mining capacity with the purchase of additional miners and by entering into hosting and power agreements with Washington facilities owners.
The company also entered into management agreements with third party investors whereby the investors purchased the mining hardware, and the company will receive both a fee to manage the mining operations plus one-half of the net operating profit.
Due to the lack of availability of adequate electric power in Washington to support the company’s growth, MGTI decided to move its principal operations to northern Sweden at the end of 2017. During the first quarter of 2018, it took delivery of additional Bitcoin mining machines in Sweden and moved or sold most of its Bitcoin mining machines from Washington.
During the fourth quarter of 2018, the company commenced the move of its mining machines back to the U.S., to both Colorado and Ohio. The move was completed in early January 2019.
Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -15%.
MGT Capital Investments Inc. (OTCMKTS:MGTI) generated sales of $70K, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 150% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.1M against $987K).