For crypto investors, blockchain stocks are important assets to consider. These publicly-traded companies provide liquid exposure to broader crypto trends. Accordingly, if Bitcoin (BTC-USD) prices rise (which likely means other digital asset prices are increasing), these companies tend to outperform on a relative basis. And being able to buy and sell shares in these stocks on an exchange can provide the simplicity many investors are looking for.

Unfortunately, betting on any one of the following three blockchain stocks I’m going to discuss in this article means investors are making an implicit bet on where crypto prices are heading. In the case of the following three companies, which are Bitcoin miners, that means Bitcoin prices in particular. And while Bitcoin prices have trended higher over the long-term, it’s also true that this is an asset that has seen stark declines in the past. Accordingly, there’s precedent for a significant move lower, if Bitcoin prices don’t cooperate with investors’ expectations.

Bitfarms (BITF)

In June, Bitfarms (NASDAQ:BITF) mined 189 bitcoins, up from 156 in May. That’s some solid growth investors may look at and think — why should I sell a company that’s increasing its overall Bitcoin production?

Well, for one, the company also sold 134 Bitcoin for $8.8 million in June to support its ongoing operations. And while the company’s Bitcoin holdings rose to 905 (valued at $55.2 million), continued upgrades on new facilities (involving installing 39,000 new miners and making upgrades to its Quebec facility) will cost money. That may mean the company will need to tap into its existing Bitcoin holdings to support its ongoing capital expenditures.

Now, Bitfarms does have relatively strong fundamentals relative to other miners, including a zero-debt balance and $124 million liquidity. With a target to increase hash rate capacity to 35 EH/s by 2025, Bitfarms is positioned for potential revenue and EBITDA growth if Bitcoin trends upward.

However, the question remains whether this will be the case. In my view, there’s simply too much risk with this name to suggest investors may want to consider buying at current levels. If Bitcoin prices dip significantly, this is a company that could be selling Bitcoin at the wrong time, leading to further valuation compression over time.

Hut 8 (HUT)

Hut 8 Mining (NASDAQ:HUT) is among the blockchain stocks on this list many investors may be bullish on. This company was highlighted as a top pick by analysts at Hallum Capital, and its share price surged as of mid-July to more than $21 per share. Unfortunately, since that recent peak, shares of HUT stock have been nearly halved, now trading around the $11 per share level.

There are reasons for the stock’s recent upgrade, with Hut’s growth potential significant in a rising Bitcoin price environment. But given the stock is trading around 15x sales, it’s clear that plenty of enthusiasm is baked into its valuation. Any sort of significant decline in Bitcoin prices could mean much further downside, given the level at which this stock currently trades.

Increased volatility is my biggest concern for Hut, which is a company that has looked to expand into AI. The AI trend is losing steam to a certain degree, and we’ve seen marked selloffs in this stock over the past few weeks alone. For those looking to avoid this kind of volatility moving forward, HUT stock is one I think is worth leaving alone for now.

Hive (HIVE)

Hive Blockchain (NASDAQ:HIVE) has emerged as an efficient Bitcoin miner, particularly after the recent Bitcoin halving. The company strategically acquired advanced mining hardware, maintaining its market share despite rising global hash rates. Additionally, Hive began diversifying into the high-performance computing (HPC) market, providing a potential alternative to the volatile Bitcoin sector. This operational efficiency and diversification position Hive well to navigate crypto mining challenges while pursuing more sustainable revenue sources.

That said, like the other companies on this list, Hive is investing heavily in its core infrastructure. This heavy investment could be taking place at the wrong time, if Bitcoin prices are indeed heading for another cycle lower.

The company recently announced the purchase of 500 Bitmain S21 Pro Antminers to continue its monthly equipment upgrades. These units, expected to arrive in July, will boost the firm’s total operational hashrate to 5.6 EH/s. In early July, HIVE reported a 2% increase in its crypto holdings, reaching 2,503 BTC, with 119 BTC mined in June, matching May’s output. Following this news, HIVE Digital’s shares jumped over 13% on Nasdaq, reaching $4.15.

I’m not so sure this reaction makes sense, given the company’s high valuation (nearly 3x sales) at a time when it’s already losing money. If a Bitcoin miner can’t make money with Bitcoin trading at these levels, that’s concerning to me. If you’re in the same boat, this may be a stock to avoid right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.