25 May 2022

Mining stocks slightly rebounding

During the first half of May, the bitcoin price fell below $30k, leading to a complete mining stock bloodbath. With the bitcoin price now stabilizing, mining stocks seem to have taken a breather for now.
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Stronghold is the best performer over the past seven days, but the stock is still down 78% YTD. The company is valued at very low multiples right now, and it looks like value investors have been smelling blood in the streets, picking up some cheap shares.
Source: Tradingview
Stronghold is vertically integrated and powers its bitcoin mining operation with a self-owned power plant using local coal refuse as the energy source. At its core, the company is a power generator and not a pure bitcoin miner, and they have two options in selling their power: Either using it to mine bitcoin or selling it to the grid.The current soaring energy prices can be problematic for grid-connected miners, but this is not as big of a problem for Stronghold because they have this additional option of selling electricity to the grid if it becomes more profitable than using the electricity to mine bitcoin. We can view Stronghold's optionality from owning a power plant as a call option on energy prices, which reduces their risk since bitcoin miners are inherently short energy prices.Over the past seven days, the worst performer is Hive, decreasing 16%. Greenidge, Mawson, CleanSpark, and Bitfarms also fell between 15% and 13%, but these are not unusual for bitcoin mining stocks, and we have seen much worse performances earlier this year.
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