Bitcoin (CCC:BTC) rallied in 2020 as it nearly quadrupled in price from $8,000 in January 2020 to above $31,000 in late December. It reached a new all-time high above $34,000 in 2021. An indirect way to gain from this price appreciation is to consider crypto mining stocks to buy.
Here is simple explanation of the mining process from Sectigostore.com:
“The term crypto mining means gaining cryptocurrencies by solving cryptographic equations through the use of computers. This process involves validating data blocks and adding transaction records to a public record (ledger) known as a blockchain.”
Crypto mining is a complicated process. It requires a lot of capital expenditures in technology equipment. And, it has significant expenses in terms of electricity and even cooling equipment for a large number of computers used.
The crypto mining business is risky but can be promising and profitable if bitcoin appreciates in the future. Research on global cryptocurrency mining market by Industry Research is optimistic about the growth of this market in the next five to six years.
“The global Cryptocurrency Mining market size is projected to reach US$ 2584.6 million by 2026, from US$ 1015.9 million in 2020, at a CAGR of 16.8% during 2021-2026.”
Meanwhile, a report by Technavio projects growth of $2.8 billion in the mining hardware market from 2020 through 2024.
With growth expected both for the cryptocurrency mining and its hardware, cryptocurrency mining stocks are worth considering. For investors interested in positions related to bitcoin, here are four crypto mining stocks to buy:
- Riot Blockchain (NASDAQ:RIOT)
- Marathon Patent Group (NASDAQ:MARA)
- Canaan (NASDAQ:CAN)
- HIVE Blockchain Technologies (OTC:HVBTF)
Crypto Mining Stocks to Buy: RIOT
Leading the way of the crypto mining stocks to buy is Riot Blockchain, which is based in Castle Rock, Colorado, and was founded in 2000. Its stock has a market capitalization of more than $1 billion. Its stock price surged from $1.49 in January 2020 to top $16 per share in late December 2020.
The company is investing in its bitcoin mining business expansion heavily as it announced “an expected 65% increase in bitcoin mining hash rate capacity resulting from the purchase and future deployment of 15,000 S19 Pro and S19j Pro Antminers from Bitmain Technologies Limited.”
Riot Blockchain and its stock could benefit from future expansion and upgrading mining operations. The company is unprofitable for the past three years and an increase in bitcoin price could be a key catalyst for profitability.
Marathon Patent Group (MARA)
Small-cap stocks such as MARA in general are higher risk compared to large-caps. With a market capitalization of less than $600 million, this stock has great risk, but also the potential for high returns. And in 2020 this crypto mining stock delivered an exceptional return soaring from just over $1 per share to about $14 per share in December 2020.
It is based in Las Vegas and its fundamentals are not inspiring. What is worth mentioning is a recent by the company that, “According to publicly available Bitcoin profit calculators, if all the miners we have purchased were deployed today, and Bitcoin’s price was $28,000/BTC, we would produce approximately $618 million in revenue annually and approximately $523 million in gross profit annually.”
Marathon patent group also is investing heavily in expanding its crypto mining business. If the above statement is true, then the price-sales ratio of the stock would be now below 1. The good news is that bitcoin surpassed $28,000. The further price increase could also boost the profitability of the company and support a higher stock price.
Canaan is based in China and manufactures hardware that can be used for bitcoin mining. It will benefit if companies invest more in equipment for an efficient and cost-effective crypto mining business. Expectations of selling more hardware are realistic and that’s why it is on this list of crypto mining stocks to buy.
Also in this case, the story about the fundamentals is true. The company is not yet profitable and third-quarter 2020 results were not good for revenue. Still, there is some good news. The company announced in September 2020 a $10 million share repurchase program over the next 12 months. However, that anmount may seem trivial for a company with a market capitalization of more than $1 billion.
The repurchase reflects the optimism of the company’s management for future business conditions.
Hive Blockchain Technologies (HVBTF)
The last entry on the list of crypto mining stocks to buy is Hive Blockchain Technologies, which has a price-earnings ratio of 43.33. Not something to call it a bargain stock, but still it is profitable. The company is based in Canada with operations in Canada, Sweden and Iceland.
The key to success for this small-cap stock is to increase revenues and control costs. For the revenue part, it has already shown a successful positive trend increase for the past three consecutive years. And its operating income for the 12 trailing months is positive.
A recent acquisition allows the company to doubles its bitcoin production capacity, as reported by AccessWire, is positive.
The novel coronavirus pandemic posed severe problems for crypto mining companies in logistics and the supply of miners. A return to normal business conditions will be a positive factor for these crypto mining stocks.
On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.