What transpired
Last month, numerous cryptocurrency-related stocks experienced significant growth, not attributable to Bitcoin's influence.
Many cryptocurrency-aligned corporations experienced impressive stock surges in July 2023. MicroStrategy (-3.58%), for example, recorded a 27.9% gain last month, while CleanSpark (-12.45%) and Riot Platforms (-16.54%) saw their shares soar by 40% and 56.7%, respectively, as stated by data from S&P Global Market Intelligence.
However, the scenario was contrasting for Bitcoin itself, which witnessed a decline of 3.9% in its token prices over the same period. So, why did CleanSpark, MicroStrategy, and Riot perform so well without the typical boost from rising Bitcoin prices?
The inquiry
The crypto-oriented sector showcased its dedication to mining and long-term Bitcoin ownership.
Riot, for instance, disclosed in its July 6 operations report the focus on its Bitcoin-mining equipment purchases and installations, rather than the 460 tokens mined and 400 coins sold in June. Moreover, it emphasized its ability to scale back Bitcoin production and sell excess energy to a strained Texas power grid during the summer heatwaves, thereby conserving energy for vital operations.
CleanSpark, being unaffected by the Texas heat, ran its mining equipment at full capacity in July, producing 491 new coins and selling 413 of them to finance its operations. Moreover, it highlighted its growth in facilities in Washington and recent asset purchases in Georgia. The company plans to invest in thousands of mining machines and expand its Bitcoin-mining capacity.
MicroStrategy, distinct from the others, does not mine new Bitcoins but focuses on investing in the cryptocurrency. Its Q2 earnings report on August 1 revealed that it purchased 12,333 new Bitcoins, bringing its total holdings to 152,800 tokens by the end of July. These acquisitions were financed using its operating cash and credit facilities.
Moreover, signs of recovery in the global and US economies in July led to these companies recording their best gains of the month on July 13. The trio's stock prices increased in unison as inflation rose at a slower rate than anticipated, presenting a positive outlook for debt-ridden businesses.
The situation
It is essential to consider that companies closely linked to the crypto industry often follow suit with digital asset gains and losses. In this case, Bitcoin itself remained unaffected by economic quirks as it is not influenced by interest rates on financial debt. However, CleanSpark has more debt than cash on hand, while MicroStrategy has invested 97% of its cash into Bitcoin ownership. Riot Platforms boasts the strongest balance sheet among the trio, but even it would be in trouble without a digital lifeboat if Bitcoin prices plummet again.
As a result, it is hardly surprising to see Riot, CleanSpark, and MicroStrategy recording significant gains when Bitcoin prices were sliding. These companies can be seen as advanced indicators of future Bitcoin-mining facility expansions and investments in the forthcoming quarters.
Bitcoin's relatively stable price changes in recent weeks suggest that it is an intriguing long-term investment opportunity at present. For a more detailed discussion, delve into the upcoming "halvening" event here.
Notes
- Institutional Investor Interest in Bitcoin
- Investor Confidence in Long-Term Potential of Companies
- Operational Efficiency and Growth in Mining Operations
- Beneficial Regulatory Environment for Cryptocurrencies
- Strategic Acquisitions and Holdings of Bitcoin by Companies.
Despite Bitcoin's decline in July 2023, MicroStrategy continued to invest in the cryptocurrency, purchasing 12,333 tokens and increasing its holdings to 152,800. This strategy of investing money into Bitcoin demonstrated MicroStrategy's confidence in the long-term potential of cryptocurrencies in finance.
CleanSpark, on the other hand, utilized the sales of its mined Bitcoin to finance its operations, showcasing the financial flexibility that comes with investing in Bitcoin-mining. This approach to managing resources is an essential aspect of financial management in the crypto industry.
