Inflation has been a problem for Bitcoin. According to the experts, that wasn’t supposed to be how the game played out. Bitcoin, we were told, was “digital gold”: an inflation hedge for the twenty-first century. (1)
But that isn’t how things have played out for cryptocurrency investors this year. As it turns out, Bitcoin has been highly correlated with growth stocks (2) and risky assets of every stripe and the biggest loser in the global asset universe during 2022 – the first year featuring high inflation in a generation.
While that has been bad news for Bitcoin all year thus far, the action this week suggests the potential that it could start to become good news ahead.
The key point in this argument is the fact that risk assets, including Bitcoin, closed in the green on Wednesday despite the worst consumer price inflation in over four decades. CPI came in at a whopping 9.1% in annual inflation growth in June, as reported by the U.S. Bureau of Labor Statistics on Wednesday morning. (3)
It was a “hot print” for the market, and stocks and bonds sold off immediately in response – as did Bitcoin. But as the day wore on, rates came back down, and the Nasdaq and Bitcoin started to rally. Risk assets and bonds ended the day in the green, shrugging off the rough data and possibly signaling a risk market that has been washed out.
No asset class has been as washed out as the cryptocurrency space this year. (4) That could translate into an opportunity for speculators over coming days and weeks.
With that in mind, we take a closer look below at some of the most interesting opportunities among stocks tied to the cryptocurrency theme.
Block Inc. (NYSE:SQ) is an interesting way to get exposure to Bitcoin. The company holds Bitcoin on its balance sheet and also processes crypto transactions through Cash App. Square is more resilient than other Bitcoin stocks because it doesn’t depend on crypto exclusively to make money. (https://seekingalpha.com/article/4451205-square-stock-get-your-bitcoin-exposure)
The company operates through its Square, Cash App, TIDAL, Spiral and TBD54566975 products. Square helps sellers run and grow their businesses with its integrated ecosystem of commerce solutions, business software, and banking services. Cash App allows users to send, spend, or invest money in stocks or Bitcoin. Spiral (formerly Square Crypto) builds and funds free, open-source projects that advance the use of Bitcoin as a tool for economic empowerment. headquartered in San Francisco, CA.
Block Inc. (NYSE:SQ) recently announced that it is working with Apple to enable Tap to Pay on iPhone, Apple’s contactless payment acceptance capability, within the Square Point of Sale app.
“As a seasonal business that’s always on the move, it’s important to have an easy-to-use, reliable mobile option for taking payments,” said Teddy Rojas, owner of Kona Ice Vacaville, an early participant in Square’s Early Access Program. “Square and Apple are making it really convenient to make sure we never miss a sale. With Tap to Pay on iPhone, I can process contactless payments quickly, even on cellular service, and it provides a really straightforward experience so new staff can easily get up and running on taking payments on an iPhone.” (5)
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. Shares of the stock have powered higher over the past month, rallying roughly 2% in that time on strong overall action.
Block Inc. (NYSE:SQ) managed to rope in revenues totaling $4B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -21.7%, 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 ($4.9B against $6B, respectively). (6)
BlockQuarry Corp. (OTC US:BLQC) has a different model that, in theory, should mean the stock isn’t necessarily at the mercy of changes and volatility in the price of Bitcoin.
The company operates with 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.
BlockQuarry Corp. (OTC US:BLQC) shares, despite this model, been pounded in the market rocked over recent months right along with the rest of the crypto space. But the company has posted good growth data and would seem to be on pace to announce another strong quarter for Q2 given its hosting deal announced with global leader Bitmain.
The company recently announced 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, as noted above, nailed down a few key partnership agreements. In particular, it has key deals with Bit5ive and Bitmain Technologies that would seem to basically guarantee significant steady cash flows irrespective of changes in the price of Bitcoin. But the market appears to be missing this point so far, which could spell a big opportunity for savvy market participants.
Bitfarms Ltd. (Nasdaq:BITF) owns and operates blockchain farms that power the global decentralized financial economy.
It provides computing power to crypto currency networks such as Bitcoin, Bitcoin Cash, Ethereum, Litecoin and Dash, earning fees from each network for securing and processing transactions.
Bitfarms Ltd. (Nasdaq:BITF) recently provided a Bitcoin (BTC) production and mining operations update for June 2022.
“The Bunker is nearing the completion of Phase 2, and it will be our largest active site, with 36 megawatts (MW) powering approximately 913 petahash per second (PH/s), which alone is nearly our total hashrate as at the end of 2020,” said Ben Gagnon, Chief Mining Officer of Bitfarms. “Miner deployments at The Bunker drove a 6% increase in our sequential month-over-month hashrate to 3.6 exahash per second (EH/s). Production averaged 14 BTC/day for the month and is currently clocked at 14.6 BTC/day.” (8)
Even in light of this news, BITF hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -13%.
Bitfarms Ltd. (Nasdaq:BITF) has a significant war chest ($394.8M) of cash on the books, which is balanced by about $178.4M in total current liabilities. One should also note that debt has been growing over recent quarters. BITF is pulling in trailing 12-month revenues of $227.7M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 41.9%. (9)
Other key stocks in the cryptocurrency space include Marathon Digital Holdings Inc. (Nasdaq:MARA), Overstock.com Inc. (Nasdaq:OSTK), PayPal Holdings Inc. (Nasdaq:PYPL), Canaan Inc. ADR (Nasdaq:CAN), and Bit Digital Inc. (Nasdaq:BTBT).
References:
- https://www.cnbc.com/2022/07/08/why-bitcoin-doesnt-seem-to-be-a-hedge-against-inflation.html#:~:text=Bitcoin%20has%20plunged%20in%20value,during%20times%20of%20rising%20inflation.
- https://blockworks.co/crypto-is-more-correlated-with-tech-stocks-than-ever-how-do-we-decouple/
- https://finance.yahoo.com/news/june-cpi-preview-inflation-likely-surged-to-new-40-year-high-last-month-215233961.html
- https://fortune.com/2022/07/01/horror-story-charts-first-half-2022-stocks-crypto/
- https://finance.yahoo.com/news/square-announces-plans-bring-tap-160000134.html
- https://www.marketwatch.com/investing/stock/SQ?mod=search_symbol
- 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
- https://finance.yahoo.com/news/bitfarms-provides-june-2022-production-110000790.html
- https://www.marketwatch.com/investing/stock/BITF?mod=search_symbol
