Bitcoin has dropped below its $38,000 mark, down 10% over the past 7 days and almost 30% from the February high of nearly $46,000. This dip certainly hurts any company involved in Bitcoin, including the companies that mine cryptocurrency. A lower coin price coupled with a higher hashrate squeezes what were once healthy profit margins.
However, it’s not all doom and gloom, most Bitcoin experts have projected this kind of volatility and with macro market news such as the Ukrainian crisis and looming Fed hikes, it’s no wonder $BTC prices are dropping. The only thing doing well on the market today are commodities such as oil and gold. Still, crypto mining companies may actually be better investments than their physical mining counterparts.
HOW BITCOIN MINING WORKS
Bitcoin mining at its most basic is when computers check and validate a block of transactions that then get added to the blockchain. When a block is completed miners receive a ‘reward.’
It’s not as simple as it sounds, however, ‘validating a block’ means solving complex mathematical problems which require sophisticated ultra-fast computers that are expensive and use a ton of power.
More miners joining the network adds to the difficulty of mining, and thereby the cost.
THE CASE FOR BITCOIN MINERS
Institutional investors, who have restrictions on their ability to invest in cryptocurrencies, instead buy shares of listed crypto miners or ETFs that track miners as a way to play the industry. As long as there are longs in Bitcoin, mining companies will still benefit from this investment.
Experienced investors who understand the dynamics of the market understand that when everyone is selling, eventually there are major discounts to take advantage of. It’s called “shaking the weak hands.” It’s generally a way the rich get richer.
On that same ‘token’ many new mining outfits may not be able to survive these tighter profit margins, and eventually by squeezing them out, the established farms will take a larger market share.
If BTC prices come back this will boost profits at a rapid pace for miners with a large market share.
WAYS TO BUY THE DIP
Some of the more established names in mining are over 50% off their highs.
Marathon Digital Holdings (Nasdaq: MARA) is a great example. The bitcoin mining company was up 881% over the past 3 years and its revenue grew at an average of 140% each of the past three years. Even without the macro events pushing the stock lower, MARA was due for a pullback.
Riot Blockchain (Nasdaq:RIOT) is another established player in the mining market that has fallen on hard times with the rest of the industry. However, it’s numbers have been quite rosey. In Q3 2021, the company reported revenue of $64.8 million. On a year-over-year basis, revenue increased by 2,532%. For the same period, the company reported an adjusted EBITDA of $37.6 million. This implied an adjusted EBITDA margin of 58%.
Riot Blockchain (Nasdaq: RIOT) also reported hashing capacity of 2.6EH/s. Since, according to a January 2022 update, the hashing capacity grew over 33% to 3.4EH/s.
Other established players to radar include BitFarms (Nasdaq:BITF) and Bit Digital (Nasdaq: BTBT).
ONE WAY TO PLAY THE DIP NOW
Marketing Worldwide Corp. (OTCMKTS:MWWC) is a unique way to play the BTC dip. The company’s Minosis platform allows users to mine through the platform. It provides new miners with a lower cost of entry and may not be effected as much by lower mining margins. They collect fees regardless.
Marketing Worldwide (OTCMKTS: MWWC) also just announced a 10 to 1 Forward Split. The ‘x-date’ is March 31st, meaning that’s the last day to purchase shares prior to the April 1st split. Historically, forward splits lead to increased value prior to and after the split.
MWWC may be one of the only options in the bitcoin mining space that requires immediate attention.
THE CASE FOR A BITCOIN BOUNCE
At the end of the day the Bitcoin blockchain was created anonymously with a final limit of 21 million coins, of which nearly 19 million has already been minted.
BTC is a finite resource, even if it’s fungible. BTC bulls should back miners in the near term.
This article is part of a sponsored investor education program.