As we approach a potential crypto bull market, history suggests that certain stocks may significantly outperform major cryptocurrencies when prices surge. Despite Bitcoin’s recent uptick, many related equities remain well below their previous highs. However, if crypto continues its upward trajectory, companies associated with crypto could see substantial gains.
The crypto market is known for its volatility, and corrections or downturns are to be expected. Nevertheless, several factors hint at a favorable environment for crypto, including optimism surrounding a Bitcoin ETF and the upcoming halving event in April, which is likely to boost Bitcoin prices in the long run. Additionally, anticipated rate cuts in 2024 could provide further momentum for the sector.
Now is the time to identify stocks that are poised to deliver exponential returns during the next crypto frenzy. Three stocks, in particular, are worth watching.
Riot Platforms (NASDAQ:RIOT) is a top pick for investors interested in the crypto mining space. The company has been steadily expanding its Bitcoin mining operations to take advantage of future bull runs. In November, its Bitcoin production increased by 21% month-over-month to 552 BTC. As Riot’s hash rate grows, so does its production.
Riot is set to see significant capacity growth over time. In June, the company signed a long-term purchase agreement with MicroBT for 33,280 next-gen Bitcoin miners, primarily for its Corsicana mining facility in Texas. This month, the company added another 66,560 miners through a secondary MicroBT order. These deals will increase Riot’s self-mining hash rate by 26 EH/s, with full deployment expected by mid-2025. This will triple its current capacity.
Even with Bitcoin currently 40% below its all-time high, Riot’s cost to mine 1 BTC is $5,537. With Bitcoin trading above $42,000, Riot’s margins are healthy. If Bitcoin enters a bull market, the profit potential for Riot is enormous.
Marathon Digital (NASDAQ:MARA) is another crypto mining company that stands to benefit from Bitcoin’s long-term rise. Although Marathon’s cost to produce each Bitcoin is significantly higher than Riot’s at about $19,000 per coin, the company’s growth in recent quarters is hard to ignore.
Marathon mined 3,490 Bitcoins in Q3 2023, a 467% increase compared to the same quarter the previous year. It generated $64 million in net income on this revenue. Despite the high mining costs, Marathon remains profitable. With Bitcoin near the $42k mark, this profitability is likely to continue into the next year.
Hive Blockchain (NASDAQ:HIVE), while smaller than Riot and Marathon, presents an opportunity given its recent performance. Hive’s expansion is equally impressive. In November, the company produced 276 Bitcoin across mining facilities in Canada, Sweden, and Atlantic Canada.
Hive’s cost to mine each Bitcoin is approximately $22,600, the highest among the three stocks discussed today. However, profitability isn’t a major concern with Bitcoin trading at nearly double the company’s cost. Hive continues to acquire next-generation miners at discounted rates to increase capacity ahead of Bitcoin’s next sustained rise. The company’s cost per Bitcoin should decrease once this equipment is operational in the next 6-12 months.
Hive aims to maintain cash flow breakeven production levels after April’s Bitcoin halving event, before reaping larger profits when crypto values increase. Therefore, Hive stock represents a higher-risk but potentially higher-reward play on the long-term crypto mining theme if Bitcoin booms, as many experts predict by 2025.
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