Capitalizing on the Generational Washout in Crypto Markets (RIOT, BLQC, COIN, MARA, HIVE, HUT, SQ, MSTR)

After the past week, the cryptocurrency space is now the poster child for this bear market in global risk assets. It has been perhaps the most dramatic example of riches to rags – transitioning from a speculative darling to a smoking crater of bearish damage in a matter of months. (1)

In about 7 months, Bitcoin has fallen from nearly $70k to as low as about $17k, losing nearly 76% in that time. (2)

It all comes down to the market cycle. When people have easy access to cheap leverage and momentum to the upside in risky assets, we tend to see herding in the right direction for aggressive speculators. 

At this point in history, cryptocurrency assets are as speculative as it gets: even if they may one day define the gold standard for how transactions are processed across the global economy, they are still an as-yet unproven bet on the future. And when interest rates rise in rapid fashion, bets on as-yet unproven long-term growth themes tend to suffer, especially if they have become soggy with leveraged bets. (3)

During the ensuing bear market after a speculative frenzy, people look for companies and securities able to drive dependable growth in cash over those that promise big returns later in exchange for faith now.

But there’s a flip side to this coin – one that might be nearing relevance by the day: during such periods, investors have the potential to gain exposure to some of the most promising long-term growth stories for a fraction of the price they might see when confidence in such bets is high.

The current moment appears to offer just such an opportunity, with former high-fliers trading at 10, 20, or 30% of their levels from just a year ago, pounded lower by the risk-off energy inspired by the Fed’s mission to get inflation under control before it becomes endemic in the economy over the long term via a shift in consumer and employer long-term expectations. (4)

In such a context, cryptocurrency stocks could represent one of the most important low-hanging-fruit growth investment opportunities of this bear cycle. With that in mind, we take a closer look below at some of the most interesting stocks tied to the space right now.

Riot Blockchain Inc. (Nasdaq:RIOT) focuses on mining Bitcoin, and through Whinstone, its subsidiary, hosting Bitcoin mining equipment for institutional clients. 

RIOT is expanding and upgrading its mining operations through industrial-scale infrastructure development and latest-generation miner procurement. Through Riot’s subsidiary ESS Metron, the Company engineers and manufacturers electrical equipment solutions for Bitcoin mining and other industries.

Riot Blockchain Inc. (Nasdaq:RIOT) recently announced production and operations update for May 2022, including the production of 466 BTC, an increase of approximately 104%, as compared to May 2021 production of 228 BTC. As of May 31, 2022, Riot held approximately 6,536 BTC, all produced by the Company’s self-mining operations. In addition, in May 2022, Riot sold 250 Bitcoin generating net proceeds of approximately $7.5 million.

“During May, we continued to make progress on the ongoing expansion of our Whinstone Facility in Rockdale, TX,” said Jason Les, CEO of Riot. “We’re proud to report that our first immersion building, Building F, is filled with approximately 23,000 S19 series miners. Approximately 7,000 of those miners are staged in the immersion-cooling tanks and are anticipated to be deployed pending installation of the final requisite components. Once these miners and other staged miners are fully deployed, our hash rate capacity is expected to increase to 5.4 EH/s.” (5)

Even in light of this news, RIOT has had a rough past week of trading action, with shares sinking something like -6% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -33%. 

Riot Blockchain Inc. (Nasdaq:RIOT) managed to rope in revenues totaling $79.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 244%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($312.4M against $116.2M). (6)

BlockQuarry Corp. (OTC US:BLQC) is interesting because it has a different model that should make it less connected to oscillations in the price of major cryptocurrencies like Bitcoin: BLQC has a hybrid model where most of its coming sales growth is linked to established deals with other major miners in hosting agreements. 

In other words, no matter where Bitcoin trades, BLQC will still rake in cash. This should be buffering the stock during the recent bear in crypto prices. But the market appears to be missing this point so far, which could spell a big opportunity for savvy market participants.

BlockQuarry Corp. (OTC US:BLQC) has been rocked over recent weeks as crypto prices have melted into a puddle of blood. The stock is down from over $3/share to about $0.25/share in the past 9 months despite demonstrating continued record growth and continuing to lay its multi-phase hybrid hosting foundation after nailing into place its partnership with Bitmain Technologies, one of the biggest players in the space.

This action also follows the company’s announcement of its 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. (7)

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.

“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,” noted Alonzo Pierce, President and Chair of BlockQuarry. “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.”

BlockQuarry Corp. (OTC US:BLQC)  has put in place several agreements – in partnership with Bit5ive and Bitmain Technologies – with the potential to create enormous shareholder value over a long-term time horizon, including the Company’s hosting agreements, which guarantee significant steady cash flows irrespective of changes in the price of Bitcoin. 

Hut 8 Mining Corp. (Nasdaq:HUT) is 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 the appointment of Aniss Amdiss as the company’s Chief Legal Officer, effective July 11, 2022. Based in Toronto, Aniss will lead Hut 8’s legal and governance portfolios and serve as Corporate Secretary, reporting to Chief Executive Officer Jaime Leverton.

“Aniss is going to be an excellent addition to Hut 8’s seasoned, dynamic executive team,” said Jaime Leverton, Chief Executive Officer of Hut 8. “Aniss’ vast experience and leadership acumen will ensure that Hut 8 continues to operate with integrity and transparency while consistently elevating our governance and compliance processes, which will truly differentiate us in a nascent, rapidly evolving industry.” (8)

We’ve witnessed -8% dropped from share values for HUT shareholders during the trailing week. But the stock has a track record that includes a number of dramatic bounces, so it may be worth some attention given the flush in Bitcoin and Ethereum over the weekend. What’s more, the company has registered increased average transaction volume recently, with the past month seeing 49% above the average volume levels in play in this stock over the longer term. 

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%. (9)

Other core names in the beaten down crypto space include Coinbase Global Inc. (Nasdaq:COIN), Marathon Digital Holdings Inc. (Nasdaq:MARA), Hive Blockchain Technologies Ltd. (Nasdaq:HIVE), Block Inc. (NYSE:SQ), and MicroStrategy Inc. (Nasdaq:MSTR).