Amid all the hype surrounding Bitcoin, one subset of companies in the industry has been largely overlooked by both Main Street and Wall Street: Bitcoin miners.
Now is the perfect time to buy bitcoin mining stocks.
Bitcoin mining is essential to the functionality and success of cryptocurrencies.
Miners essentially use advanced computing systems to dynamically solve complex math problems, which in turn validate the transactions of the bitcoin blockchain. Without miners doing this computation, blockchain transactions would not be validated, and cryptocurrencies would not be viable.
Miners constitute the foundation of the Cryptocurrency Revolution. There is no decentralized world of the future without miners.
Bitcoin mining stocks have crashed in recent weeks, as bitcoin prices have tumbled, because these miners are rewarded for mining in bitcoin – and therefore, if bitcoin prices drop, so do their revenues.
But most of us sit in the boat that bitcoin will rebound, eventually and inevitably, because cryptocurrencies represent the future, and bitcoin is the “digital gold” of the cryptocurrency world.
When bitcoin prices do rebound, bitcoin mining stocks will soar.
In other words, one of the best ways to play a rebound in bitcoin is to buy bitcoin mining stocks today.
So, today, we will tell you about one of our favorite bitcoin miners in the market. It’s a bitcoin miner that sits perfectly in the overlap of “big and established enough to not be a super-risky bet” and “small and unknown enough to still yield huge upside potential.” In other words, we see this bitcoin mining stock as the one with the best risk-reward profile at current levels – and that’s why we are bullish on this particular stock at the current moment.
An Attractive Asymmetric Bet on Bitcoin Mining
Quickly, let’s go over Bitcoin Mining Economics 101.
Everything boils down to the hash rate, or the compute power of an individual miner. Miners are competing to solve individual blocks of the blockchain, and for each correctly solved block, they are awarded a certain amount of bitcoins.
To solve those blocks, miners need compute power, meaning each miner has their own compute power (hash rate) and the whole network has its own total computer power, that is equal to the sum of the hash rates of each individual miner.
The “market share” of a miner is equal to that miner’s individual hash rate, divided by the total Bitcoin network hash rate. The revenues of a miner, therefore, are equal to that “market share” multiplied by the total number of bitcoin mined in a year, and subsequently multiplied by the individual price of bitcoin.
When looking at bitcoin miners, then, the bigger the hash rate, the better.
And that’s why we like a Canadian bitcoin miner by the name of Bit Digital (NASDAQ:BTBT).
Bit Digital is a respectably sized bitcoin miner today, in terms of hash rate. Its hash rate presently sits around 2,600 petahashes per second (Ph/s). The bitcoin network hast rate today sits around 150,000 Ph/s. Therefore, Bit Digital controls about 1.7% of the bitcoin mining market.
But the upside here comes from the fact that Bit Digital isn’t too big yet – but will one day be very big.
That is, other miners like Marathon Digital Holdings (NASDAQ:MARA) have hash rates that are approaching 10,000 Ph/s. Those miners are worth more than $2 billion…
Bit Digital is a fraction of that size, at 2,600 Ph/s and with a mere $400 million market cap.
But Bit Digital is also expanding its hash rate by over 100 Ph/s per month through acquisitions. Management expects this trend to persist for the foreseeable future.
If it does, then you’re talking a miner that will one day have a hash rate north of 5,000 Ph/s. That simply isn’t priced into the company’s current $400 million market cap.
Here’s the math for big upside.
Let’s say Bit Digital does expand its hash rate to 5,000 Ph/s. In a 150,000 Ph/s bitcoin network hash rate market, that equates to 3.3% market share. About 328,500 bitcoins are mined each year, under current constructs. One day, then, Bit Digital stands to mine about 11,000 bitcoins per year.
At a $40,000 price tag, that equates to over $430 million in annual revenue – more than the company’s current market cap.
That’s why we like the risk-reward profile here.
With Bit Digital, you have a bitcoin miner with big upside potential and limited downside risk.
So, if you’re looking for a nice asymmetric bet on rebounding bitcoin prices, you should consider taking a position in Bit Digital today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this video.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the theme of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative cutting-edge stocks, become a subscriber of Innovation Investor today.