From mid-February to mid-March, there was liquidation in many assets, including bitcoin. During this time period, bitcoin’s price plunged more than 50% before bottoming under $5,000 on March 16.
Yet since then, bitcoin has skyrocketed and exceeded its previous all-time high of $19,870 from December 2017 and it is currently trading over $28,000.
Given bitcoin’s nebulous nature and the dominance of retail flows, it’s hard to pin down the precise reason for its gains. However, below are some contributing factors:
- More financial institutions and money managers are starting to see it as a legitimate asset class.
- Since there is a fixed amount of bitcoin in the world, It’s considered by many to be a ‘store of value’. In contrast, M2 money supply has significantly increased due to fiscal and monetary stimulus.
- There are more real-world applications for bitcoin such as DeFi and payment networks.
- Bitcoin’s gains have attracted momentum and trend traders.
Bitcoin’s strength has also led to big gains for companies that are part of the crypto-ecosystem. One of the most notable is Bit Digital (BTBT), which is currently trading 100% higher in just the past 5 days of trading. Overall, since bitcoin’s bottom in mid-March, BTBT is up 3,190%.
While the stock is overbought by many measures, it seems to be one of the best companies positioned to profit from further gains in bitcoin.
BTBT is a crypto miner with its primary focus on bitcoin since that is the most profitable to mine. BTBT changed its name from Golden Bull to Bit Digital in September. Golden Bull was founded in 2015, originally as a consumer finance platform for short-term loans and peer-to-peer lending. It also had a car rental business. As part of this reorganization, it spun off these divisions to focus on bitcoin and crypto mining.
Miners provide the computing power for the blockchain technology that makes bitcoin work, and they’re paid intermittently in bitcoin. These operations are quite expensive and energy-intensive due to the required computing power. However, these operations are much more profitable at current prices.
In its last quarter, BTBT reported $7.9 million and mined 739.51 bitcoins. Its expenses were $7.8 million. Given the recent gains in bitcoin’s price, revenues should be 35% higher assuming the same rate of production.
Currently, BTBT has a total of 40,865 mining rigs across its current facilities in China and North America. And the company continues to expand its mining operations.
Just like a commodity producer’s price is most affected by moves in the underlying commodity, BTBT’s price will be determined by bitcoin. There are many bitcoin bulls who believe that bitcoin’s price will continue trending higher as it becomes an integral part of the global financial system, while there are skeptics who’ve compared it to a “global ponzi scheme”. So far, the bulls have looked prophetic, while the bears are licking their wounds.
There are some other crypto miners that are traded publicly, like Riot Blockchain (RIOT) and Mara Patent Group (MARA). Yet, BTBT has a more favorable valuation than these companies with a price to sales ratio of 36, while RIOT’s is 106 and MARA’s is 306. Additionally, BTBT is actually profitable, while both MARA and RIOT have had losses in their last quarter. BTBT also has more mining rigs and a cheaper cost of production.
Therefore, if bitcoin prices keep climbing higher, BTBT is the best-positioned miner, even with a current skyhigh valuation.
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BTBT shares were trading at $12.90 per share on Wednesday morning, up $2.34 (+22.16%). Year-to-date, BTBT has gained 3,809.09%, versus a 17.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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