The price of Bitcoin is up over 140% year to date.
Much of the run has been recent mid-October, the price of bitcoin exploded from around $11,000 to breaching $19,000 recently, and it’s just shy of its record high with a market capitalization above $345 billion.
Part of the reason is that large institutions are finally joining the party.
In a recent interview on CNBC, a CIO from BlackRock said on CNBC that it “could take the place of gold to a large extent.” And JP Morgan is now claiming institutions are purchasing at three times compared to the previous quarter.
But it turns out that owning cryptocurrencies isn’t the only way to profit off the rise of Bitcoin.
In fact, hundreds of millions of dollars are being thrown at the mining of these cryptocurrencies by two publicly traded companies – companies that are already projecting big profits in the year ahead.
Crypto-Stock #1: Marathon Patent Group, Inc. ( NSDAQ:MARA)
MARA is a digital asset technology company that mines cryptocurrencies. It owns cryptocurrency mining machines and a data center to mine digital assets in Quebec, Canada.
It takes a tremendous amount of energy and computing to mine crypto. Marathon has partnered with Beowulf Energy LLC in a joint effort to supply low-cost electricity in an effort to improve profitability.
In addition, Marathon also has a partnership with ‘Bitmain’, a leading industry supplier of application-specific integrated circuit chips (ASICs) mining rigs. And in October, the company reported purchasing 10,000 additional S19 Pro Miners. Marathon has invested over $72 million in equipment and plans for a new data center since May of this year.
By the second quarter of 2021 Marathon is projecting upwards of $10 million in revenue at a reference price of $18,000/BTC as it brings new mining rig purchases online.
MARA has benefited from the rise of Bitcoin, climbing 252% this year. On November 12th Marathon reported its third-quarter earnings with a diluted GAAP EPS loss of $0.28 per share on $835k in revenue for the quarter.
In the past nine months, the company has generated $1.7 million in revenue, and the company is sitting on $27.1 million in cash and cash equivalents
It is believed by some that MARA’s scale and operating leverage offer more as a percentage relative to revenue growth and profitability than buying Bitcoin.
Crypto-Stock #1:Riot Blockchain, Inc. (RIOT)
RIOT also mines cryptocurrencies like MARA. And it too has been riding Bitcoin’s coattails as of late.
RIOT is up over 500% for the year, outpacing Bitcoin’s 20% increase. In the last week the stock has risen over 50%…
Similar to Mara, RIOT has invested in infrastructure to solidify its position in the market. They spent $17.7 million on 8000 new Antminer S19 Pro Bitcoin mining rigs to expand operations in August.
In a bold move, and a boost to investor confidence RIOT added Hubert Marleau to its Board, following the departure of Remo Mancini. Marleau, with 50 years of experience is a capital markets veteran and has served on the Boards of over 50 publicly-traded companies.
Revenue for 2021 is forecast in excess of $52 million and with the increase in revenue the per share earnings is forecast at $.02. That reflects an adjusted earnings estimate upward of $7 million.
The price target per share has been increased to $7.50 a 114% increase in what analysts had anticipated.
With the upbeat news, consensus is that RIOT will be profitable next year with upgraded revenue estimates, and increased sales that are expected to perform better than the broader market.
Bottom Line: The meteoric rise of these companies on the heels of Bitcoin as compared to three years ago is today most likely based on better structural fundamentals. At that time the rise was more speculative, today the rise may be rooted in the real thing. In fact, the technology behind cryptocurrencies very well could be as revolutionary as the internet once was.
Given the volatile nature of these stocks, a small position may be warranted to offset the risks and reap the benefit from the upside.