We examine a new, potentially very profitable POWER PLAY...
S9 miners, extremely popular mining rigs with almost 8 years in the market, are operating at a loss to anyone located somewhere paying more than 2cents USD per kilowatt-hour in electricity costs. This is most US states.
Crypto companies daily income and net worth can change drastically, fast. In the case of CORZ, which also holds 8000 BTC, Bitcoin returning to just $30,000 could happen over a single week - and would suddenly turn a company that was losing money into one that gained $80 million more in assets.
These factors are prime examples why stocks for companies focused entirely on crypto are different than anything Wall Street has seen before.
Figuring out the value of a mining company isn't as simple as a formula for their hashrate (mining power) = X BTC earned daily + BTC already owned = company value. The price of Bitcoin isn't the only factor - even the weather can dramatically change profitability, as we covered last week how Texas based mining companies are having to power down during heatwaves.
Wall Street Debates How To Trade Crypto-Company Stocks...
Because of the factors explained above, we saw Core Scientific with a stock price around $13 just 6 months ago, down to $2 today.
Browsing stock-focused online communities makes one thing clear - stock traders still aren't sure if this represents a company moving towards failure, or chance to buy something with a rare huge potential upsides.
The Power Play, Where You Don't Buy Bitcoin... and Profits Are Potentially 200% Higher...
So here's what it all comes down to - if you believe Bitcoin will return to or pass $60k again, and believe a stock like Core Scientific will return to $13 when it does (the price it was last time Bitcoin was at $60k) - the stock represents a 5X return on investment when Bitcoin's price only does a 3X.
Which is huge, and seems realistic - but will it?
The same financial press publishing crypto doom and gloom stories currently, will of course, again, hype up 'Bitcoin's comeback' when things go the other way.
So it's safe to say the buzz outlets like Bloomberg, CNBC, and Wall Street Journal will create will bring a boost to crypto related stocks as well. The audience of these publications includes a segment of investors not comfortable enough with tech to ever own crypto, but is willing to buy stocks that allow them to capitalize on a trend.
Here's Why it Isn't as Simple as 'Bitcoin up = Crypto stock up'...The benefits of Bitcoin's decentralization is highlighted here, these risks apply to stocks but are not a factor for Bitcoin.
Actually, these risks apply to any company managed by humans. A company can be derailed a number of ways - an inexperienced CEO or Board of Directors, negligence or fraud in the accounting department, a company deciding to issue a large number of additional shares, or bringing in a new key investor and issuing them a large number of shares below market value - all of these can quickly bring a stock price down - but none of then can happen to Bitcoin.
It's not even as simple as finding a company managed by trustworthy and experienced executives - note that not all of the factors mentioned above would be considered poor company management, some are just part of doing business.
I do not currently own shares of any crypto mining company stocks...This caught my interest and I immediately wrote this article, haven't moved on anything and still unsure if I will. The main reason for hesitating is this would mean canceling some of my current open positions to 'buy the dip' on Bitcoin and a couple other coins I'm confident will rise again.
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Author: Ross Davis
Silicon Valley Newsroom
GCP | Breaking Crypto News