While cryptocurrencies have captured the imagination of Wall Street and investors over the last 15 months, the recent sell-off might provide a buying opportunity for Bitcoin bulls. Bitcoin prices are down almost 50% from record highs and the same can be said about other digital currencies as well.

However, in case you are optimistic about the long-term prospects of Bitcoin, the recent dip should make the flagship cryptocurrency an attractive bet for contrarian investors. While you can buy Bitcoin via a crypto exchange such as Coinbase, you can also gain exposure to this highly disruptive space by purchasing shares of mining companies such as Marathon Digital (MARA) and Hive (HVBTF).

The stock prices of these companies have a direct correlation to Bitcoin prices making them as volatile as cryptocurrencies. So, if you believe prices of Bitcoin are expected to gain momentum in the upcoming months, these two stocks should be on your buying radar.

Marathon Digital stock is down 63% from its 52-week high

Shares of Marathon Digital Holdings have taken investors on a wild ride. During the last cryptocurrency bull run that ended in December 2017, Marathon Digital stock was trading at $23 per share. The stock then fell to just $0.50 in March 2020 and then rose to a multi-year high of $57 last month. Now, shares of the mining giant are trading at $20.9, which is 63% lower compared to last month’s high.

In Q1 of 2021, Marathon Digital Holdings reported revenue of $9.2 million which is an increase of 1,445% year over year. Its net income stood at $83 million. Bitcoin mining companies follow accounting rules that might be confusing.

Marathon and peers process blockchain transactions and are rewarded in the form of digital currencies such as Bitcoin. However, these companies recognize revenue based on the prices at which they receive Bitcoin. So, the prices of cryptos have to be updated on the financial statements every quarter. This means, while Marathon Digital reported an operating loss of $47 million in Q1, its net income was significantly higher due to an unrealized gain of $137 million in Bitcoin prices.

Marathon Digital mined 196 Bitcoin in Q1 of 2021. In fact, it mined 102 Bitcoin in March 2021 while continuing to improve its hash rate to increase mining efficiency and computing power. The company is valued at a market cap of $2.07 billion and analysts expect sales in 2021 to rise to $277 million in 2021 and by 133% to $646.5 million in 2022.

HIVE Blockchain stock is valued at a market cap of $887 million

In the Q3 of fiscal 2021 that ended in December, HIVE Blockchain’s income from digital currency mining rose 174% year over year to $13.7 million. It was also higher by 5% on a sequential basis. Its cash flow stood at $13.7 million, compared to $5.7 million in Q3 of fiscal 2020.

Comparatively, gross margin expanded to $10.6 million from the year-ago figure of $3.8 million. Its net income per share also rose from $0.01 per share in the last year quarter to $0.05 per share in Q3 of 2021.

In the December quarter, HIVE mined 21,500 Ethereum coins which were lower than the 32,000 coins it mined in the September quarter. In the last three quarters, the company has mined over 77,000 ether coins that are valued at $154 million today. HIVE stock is currently trading at $2.35, which is 60% below its 52-week high.

At the end of 2020, HIVE’s unrealized gain on investments stood at $149 million.

The verdict

The share prices of the two companies discussed here will be vulnerable to crypto price movements. While it’s not advisable to allocate a large portion of your portfolio in these companies, investors with a high-risk appetite can look to buy small quantities in Marathon and HIVE given the recent pullback.

Both these stocks should be on the radar of investors who are bullish on the cryptocurrency space. For those who expect Bitcoin to dominate digital assets, Marathon Digital remains a top bet. Alternatively, Ethereum enthusiasts should place their bets on HIVE Blockchain.

MARA shares rose $0.33 (+1.58%) in premarket trading Monday. Year-to-date, MARA has gained 106.03%, versus a 11.99% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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