There are few  investments as hot  as Bitcoin currently. Investors are now considering including cryptocurrencies in their asset allocation breakdowns to hedge against inflation and to use as a store of value.  While the most popular cryptocurrency Bitcoin traded below $4,000 at the onset of the COVID-19 in March last year, the digital currency reached  an all-time high of $58,330.57 in late February to hit $1 trillion in market cap.

Given the rapid pace of digitization, both retail and institutional investors have become enamored by the growth prospects of  cryptocurrencies.  In recent weeks, Bitcoin has received a solid boost from large strategic investments by major corporations. And investors have been rewarding bitcoin mining stocks in that an  uptick in Bitcoin prices contributes directly to the top line of these companies.

However, major cryptocurrencies and crypto players tumbled on February 22 after negative comments from Elon Musk (the founder and CEO of SpaceX and Tesla), Treasury Secretary Janet Yellen and Bill Gates. Yellen  recently issued a warning that bitcoin is an “extremely inefficient” way to conduct monetary transactions and cautioned the market regarding the dangers that it poses to investors and the public. Following this warning, the Street should be on guard for federal regulations on cryptocurrencies soon. However, defying these concerns, Bitcoin prices have made a strong revival and it appears that the pullback in cryptocurrencies and crypto miners may be over, for now.

Cryptocurrency players  Riot Blockchain Inc. (RIOT), Canaan, Inc. (CAN), and Marathon Digital Holdings (MARA) have had a volatile yet incredible run so far this year. It’s  impossible to say where the crypto stocks will go from here. Frankly, these names could continue to soar this year, or they could slump in the next big Bitcoin sell-off. So, let’s take a closer look at the factors that could influence the performance of these stocks in the near term.

Riot Blockchain Inc. (RIOT)

Colorado-based Bitcoin miner RIOT focuses on building, supporting, and operating the Blockchain technologies ecosystem and manufacturing in-vitro substances. Its portfolio includes Verady, Coinsquare, and Tesspay, which  are involved in digital currency mining operations that utilize specialized computers that generate digital currency. RIOT’s currently deployed hardware fleet consists of 6,040 next-generation Bitmain Antminers with a hash rate capacity of 456 PH/s.

Earlier this month, RIOT achieved the milestone of an estimated hash rate capacity of 1.06 Exahash per second (EH/s) with the deployment of the newly received 2,002 S19 Pro Antminers. Furthermore, on February 8, RIOT appointed board member Jason Les as its CEO. The stock has surged 33.4% since the company appointed the Bitcoin expert to be its leader.

RIOT closed Friday’s trading session at $43.74, with a year-to-date gain of 157.5%. The stock has more than doubled over the past month to hit its 52-week high of $79.50 on February 17. However, the stock has retreated significantly  from that level. It declined  9.2% intraday last Monday in line with the Bitcoin correction. Following this, RIOT declined 38.5% last week.

In the third quarter ended September 30, 2020, RIOT’s mining revenue surged 41.5% year-over-year to $2.4 million. The company has produced 730 newly minted bitcoins (BTC) year-to-date, despite experiencing downtime in the previous quarter. RIOT received and deployed 3,040 next-generation Bitmain S19 and S19 Pro Antminers during the July – November 2020 period, increasing the company’s total hashrate capacity to 566 PH/s. RIOT reported a quarterly loss of $0.04 per share, a significant improvement from its  quarter-ago loss of $0.31 per share.

RIOT is continuing its operational expansion aggressively with the purchase of an additional next-generation mining equipment from Bitmain and remains on schedule to more than triple its  currently deployed capacity by the fourth quarter of 2021. Once fully deployed, the company estimates it will have a total of 37,642 Bitmain Antminers in operation with an estimated aggregate bitcoin mining hash rate capacity of 3.8 EH/s.

Wall Street analysts are  optimistic about RIOT’s financials. There is a consensus that the company’s current year revenue and EPS will improve 1,425% and 234.6%, respectively.

Canaan, Inc. (CAN)

CAN is a leading provider of supercomputing solutions and integrated circuit (IC) final system products. The company is  renowned for having invented the world’s first ASIC-powered bitcoin mining machine in 2013 and for radically catalyzing the growth of a computationally advanced bitcoin mining sector. China-based CAN continues to be the second largest designer and manufacturer of bitcoin mining machines globally and continues to expand its suite of advanced hardware offerings, exploring opportunities across emerging technologies.

Last month CAN issued a statement stating that its revenue visibility has improved substantially in 2021 as a result of attaining purchase orders totaling more than 100,000 units of bitcoin mining machines from customers in North America. Many of those purchase orders were placed with prepayment and will likely occupy the company’s current manufacturing capacity entirely for the full year  2021 and beyond.

CAN is up 155.7% year-to-date, to close Friday’s trading session at $15.16. The stock has returned a whopping 232.5% over the past month to hit its 52-week high of $25.78 on February 19. However, the stock declined 15.8% in the following session, with respect to the Bitcoin correction. In fact, CAN  lost nearly 39% last week.

In the third quarter ended September 30, 2020, CAN delivered total net revenues of $24 million, declining 75.7% year-over-year and 8.5% sequentially. The decrease was driven primarily by the decreases in total computing power sold and average selling price per Thash/s during the quarter. CAN reported a loss of $0.54 per share, more than quadruple the quarter-ago loss of $0.10 per share.

Over the past year, CAN has strengthened its research and development capabilities, expanded its AI business, and executed new business initiatives. In addition, the company has also accelerated the monetization of its AI business through its partnerships with several companies in various industries, such as online education and smart city solutions. With new generations of mining machines and AI chips in CAN’s pipeline, analysts are confident that its enhanced performance should continue to bolster the company’s competitive advantages and solidify the market leadership.

Marathon Digital Holdings (MARA)

MARA is a digital asset technology company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets. The company was formerly known as Marathon Patent Group and has recently rebranded itself as Marathon Digital Holdings to reflect its core competency in mining cryptocurrencies and investing in digital assets.

MARA is investing heavily in expanding its crypto mining business by purchasing and deploying new mining equipment to ensure its share of the bitcoin network and to rapidly increase its hash rate. Earlier this month, MARA deployed 4,000 Antminer S-19 Pro ASIC miners at its mining facility in Hardin. MARA’s mining fleet currently  consists of 6,560 miners producing approximately 688 PH/s.

MARA closed Friday’s trading session at $30.15, with a year-to-date gain of 189%. The stock has surged a massive 380% in the past three months. MARA  hit its 52-week high of $49.41 on February 17 but is currently  trading 39% below it. The stock  fell  14.2% last Monday, culminating  in a 30% loss in the past week.

In the third quarter ended September 30, 2020, MARA delivered revenues of $0.84 million, surging 160% year-over-year. The company generated $650,000 in Bitcoin revenue, the largest quarterly Bitcoin revenue in MARA’s history. Though the company reported a loss of $0.06 per share, the results  marked a significant improvement from its  year-ago loss of $0.12 per share.

MARA purchased 4,812.66 BTC in January at an aggregate purchase price of $150 million. MARA’s  management believes this investment establishes MARA as one of the few  pure-play, bitcoin investment options. It believes that holding  part of its treasury reserves in Bitcoin will be a better long-term strategy than holding U.S. Dollars. In line with rising Bitcoin prices, Wall Street analysts expect MARA’s current year revenue and EPS to improve 4,347.7% and 731.6%, respectively.

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RIOT shares were trading at $51.13 per share on Monday afternoon, up $7.39 (+16.90%). Year-to-date, RIOT has gained 200.94%, versus a 4.18% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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