Why Crypto Stocks May be the Best Route to Monetizing the Bitcoin Bear (SDIG, BLQC, HUT, MARA, MSTR, RIOT, COIN, SQ)

Cryptocurrencies

Bitcoin has been in another major bear market over recent months (1). But, as any experienced investor knows, bear markets and bull markets come and go. Just take a gander at a long-term chart for Crude Oil or Gold or Copper or the Euro.

Bitcoin is not a stock. It’s closer to a commodity or a currency market (2). And history is replete with evidence that foreign exchange markets and major commodities don’t move in one direction forever. They ebb and flow.

Hence, while we are somewhere in the process of an “ebb” in bitcoin and the broad cryptocurrency complex, this too shall pass.

The big question for investors is about how to best use the opportunity of this bear to position for maximum advantage ahead of the next bull cycle. The seeds of that cycle are being planted now. In time, they will flower and bear fruit.

Crypto-related stocks could be one of the best implementation strategies to take advantage of the opportunity in play now because many have seen declines even greater than Bitcoin, yet some are positioned to weather the storm better than others, even though the selling in the space has been indiscriminate.

With that in mind, we take a look below at some of the most interesting crypto-related stock stories in the space.

 

Stronghold Digital Mining Inc. (Nasdaq:SDIG) engages in crypto asset mining. It wholly-owns and operates Scubgrass Plant, an environmentally beneficial coal refuse power generation facility.

Stronghold is a vertically integrated Bitcoin mining company with an emphasis on environmentally beneficial operations. Stronghold houses its miners at its wholly owned and operated Scrubgrass Plant and Panther Creek Plant, both of which are low-cost, environmentally beneficial coal refuse power generation facilities in Pennsylvania.

Stronghold Digital Mining Inc. (Nasdaq:SDIG) recently reported financial results for its first quarter ended March 31, 2022, and provided an operational update, including news that the company mined 438 Bitcoin during the first quarter of 2022, including 198 in March 2022 and mined over 100 Bitcoin in first 13 days of May with average hash rate of 0.9 exahash per second (“EH/s”) in the first quarter of 2022.

“Since we reported FY 2021 earnings on March 29, 2022, we believe that we have made significant progress on enhancing our operations, and we are executing on our goal of exceeding 4 EH/s by the end of the year,” said Greg Beard, co-chairman and chief executive officer of Stronghold. “Earlier in the year, Stronghold chose to de-emphasize growth to focus on capital discipline and financial flexibility, and recent operational and financial initiatives, including our recent issuance of the Notes, have helped de-risk our funding needs, despite recent volatility in cryptocurrency markets.” (3)

If you’re long this stock, then you’re liking how the stock has responded to the announcement. SDIG shares have been moving higher over the past week overall, pushing about 11% to the upside on above average trading volume. (4)

Stronghold Digital Mining Inc. (Nasdaq:SDIG) managed to rope in revenues totaling $28.7M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 655.6%, 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 ($39.3M against $124.4M, respectively). (5)

 

BlockQuarry Corp. (OTC US:BLQC) has a different angle, with a hybrid model that includes a large “hosting” component, where its income is guaranteed by its partner relationships no matter where the price of Bitcoin trades. Its most important partner is Bitmain Technologies, the world’s leading producer of cryptocurrency mining hardware and a leading global cryptocurrency mining firm. (6)

It has also worked with another partner, Bit5ive LLC, in designing and deploying its 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. (7)

BlockQuarry Corp. (OTC US:BLQC) has continued to show strong growth and would seem to be on pace to announce another strong quarter for Q2 after reporting record numbers for Q1 of this year in a recent release, posting 1,643% topline year over year growth and nearly 6,000% growth in total assets during the period.

The company also reported net income of over $3.5 million, which was up massively on a year-over-year basis from a net loss of $26 million in 2021. BLQC management also noted that it believes just the first step in its now-launched Southeast US crypto mining and hosting site will drive nearly $10 million in annualized sales going forward, with expansion ahead.

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.” (8)

BlockQuarry Corp. (OTC US:BLQC) is interesting because it has a different model that helps to hedge against BTC volatility. But it also has a much smaller market cap than most other commercial phase mining names, presenting more upside potential as an opportunity.

 

Hut 8 Mining Corp. (Nasdaq:HUT) bills itself as a cryptocurrency mining and blockchain infrastructure company, which is focused solely on mining bitcoin.

The company provides investors with direct access to bitcoin, without the technical complexity or constraints of purchasing the underlying cryptocurrency.

Hut 8 Mining Corp. (Nasdaq:HUT) recently announced that it increased its Bitcoin holdings by 330 in the period ending July 31. Hut 8 now has 7,736 Bitcoin in its holdings. According to the company’s release, 330 Bitcoin were generated, resulting in an average production rate of 10.61 Bitcoin per day. The company also notes that its Ethereum mining – for which it received payment in Bitcoin – generated approximately 10.7% of our total production.

“We continued to deliver results, growing our stack to 7,736 Bitcoin – one of the largest holdings globally – by mining efficiently,” said Jaime Leverton, CEO. “At the same time, we continue to focus on growing the uncorrelated recurring revenue within our high performance computing business and are thrilled to welcome Foundry aboard as a cloud services customer in our Mississauga data centre.” (9)

If you’re long this stock, then you’re liking how the stock has responded to the announcement. HUT shares have been moving higher over the past week overall, pushing about 12% to the upside on above average trading volume. (10)

Hut 8 Mining Corp. (Nasdaq:HUT) has a significant war chest ($332.3M) of cash on the books, which must be weighed relative to about $22.5M in total current liabilities. HUT is pulling in trailing 12-month revenues of $195.1M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 66.8%. (11)

 

Other key names in the Crypto stock space include Marathon Digital Holdings Inc. (Nasdaq:MARA), MicroStrategy Inc. (Nasdaq:MSTR), Riot Blockchain Inc. (Nasdaq:RIOT), Coinbase Global Inc. (Nasdaq:COIN), and Block Inc. (NYSE:SQ).

 

References:

  1. https://www.cnbc.com/2022/07/14/why-the-2022-crypto-winter-is-unlike-previous-bear-markets.html
  2. https://decrypt.co/47566/is-bitcoin-an-asset-a-commodity-or-a-currency
  3. https://finance.yahoo.com/news/stronghold-digital-mining-reports-first-200500081.html
  4. https://www.tradingview.com/chart/?symbol=SDIG
  5. https://www.marketwatch.com/investing/stock/sdig?mod=search_symbol
  6. 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
  7. 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
  8. 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
  9. https://finance.yahoo.com/news/hut-8-mining-production-operations-103000858.html
  10. https://www.tradingview.com/chart/?symbol=HUT
  11. https://www.marketwatch.com/investing/stock/hut?mod=search_symbol

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Published by Benjamin Roussey

Benjamin Roussey is from Sacramento, California. He has two master’s degrees and served four years in the U.S. Navy. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship. His second master’s degree is an MBA in Global Management from the University of Phoenix (2006). He has worked for small businesses, public agencies, and large corporations. He has lived in Korea and Saudi Arabia where he was an ESL instructor. Benjamin spends his time in between Northern California and Cabo San Lucas, Mexico, committing himself to his craft of freelance and website writing. http://www.facebook.com/ben.rouss