The Bitcoin you don’t want to miss

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It’s time to gain exposure to the burgeoning cryptocurrency market as a tidal wave of curious individual and institutional investors pours into this burgeoning asset class.

– Zack

Riot Blockchain RIOT, now one of the largest public bitcoin miners in the world following its recent acquisition of Whinestone US, is well positioned to provide us with the rare and exciting opportunity to profit from the already prolific rally in the cryptography in full resurgence.

Bitcoin BTC has rallied north of 50% since early October, hitting a new all-time high at $ 69,000 a coin, remaining well above $ 60,000 today. More than $ 2 trillion in value has been added to this nearly $ 3 trillion market in 2021 as deep-pocketed institutional investors begin to deploy capital in this ambiguous asset class. The opportunity cost of not being part of this rapidly appreciating digital currency is just too great not to have some exposure.

RIOT, which is closely tied to bitcoin’s performance, initially outpaced the crypto rally in the first month and a half of the year as traders chased momentum such as the (self-proclaimed) “degenerate” on r / WallStreetBets (WSB) has pushed the shares of this leading miner well above their intrinsic value. RIOT jumped 385% in early 2021, but its momentum-driven valuation bubble has since deflated. The stock is now trading more than 50% below its highs compared to the value opportunity we see today.

At the start of the year, euphoric short-term call option purchases drove RIOT’s Moonshot price action further away from the reach of investable assets of institutional investors and giving it the seal of overvaluation. WSB. RIOT has fallen so out of favor with the markets lately that it has fallen to a P / E of less than 20x despite analysts estimating a more than 60% increase in profits in 2022 (after a 400% jump in profits this year) and a growth perspective that continues to accelerate. This is a super low cost blockchain innovator that cannot be ignored in the midst of this crypto explosion.

With Bitcoin’s heart-wrenching rally remaining alive and Riot Blockchain’s continued operational improvements as its scales evolve, analysts are becoming increasingly bullish on RIOT, inflating EPS estimates across time frames and propelling the market forward. stock in a Zacks Rank # 1 (strong buy).

The 5 sell-side hedging analysts see RIOT as a solid buy today, with an average price target of $ 52 per share, with some more bullish analysts giving it targets north of $ 80 (over 100% at the rise from here).

Catalysts

U.S. cryptocurrency miners received one of the best gifts they could have asked for when China and Xi’s increasingly autocratic regime announced a tightened ban on crypto mining earlier this year .

12 months ago, China controlled around 70% of the global bitcoin mining market, which is measured using hash rates. Hash rates are the speed at which cryptocurrencies are mined (obtained through machine problem solving) and are a measure of the computational power and efficiency (performance) of individual and total market operations. .

Strict crypto mining banned in Asia’s largest economy created a huge hole in the market, which U.S. miners like Riot Blockchain quickly filled. The United States is now the main bitcoin miner in terms of hash rate, controlling more than 35% of that market, according to the Cambridge Bitcoin Electricity Consumption Index (CBECI). Below is a chart from the CBECI breaking down the monthly bitcoin mining market share by country.

Image source: University of Cambridge

Link: https://ccaf.io/cbeci/mining_map

The riot blockchain currently controls over 6% of the highly fragmented U.S. bitcoin mining market and is taking more and more shares on a seemingly daily basis. This blockchain innovator’s hash rate has more than quadrupled in the past year. Riot’s savvy management team predicts that its hash rate will hit 4.4 EH / s (double its rate in September) before this year is up and hit 7.7 EH / s by the next month. end of 2022.

Its recent acquisition of Whinstone (the largest crypto mining facility in the United States) is the main catalyst for its forecast of rapidly improving economies of scale.

First Bitcoin ETF hits exchanges

Following the landmark approval from SEC Chairman Gary Gensler, the first bitcoin-linked exchange-traded fund (ETF) hit the NYSE last month. Bitcoin climbed over $ 65,000 for the first time in history after this ETF debuted, as institutional interest was further validated.

ProShares BITO’s Bitcoin Strategy ETF became the first bitcoin-backed ETF to be traded in the United States, and its first performance was exceptional, with inflows of nearly $ 2 billion over the course of the year. of its first two days of trading. This was a significant milestone for the crypto market, as its futures ETF approval opens the door for institutional funds and wary investors to gain exposure to this questionable (but profitable) crypto market through through exchanges approved by the US government.

CME bitcoin futures (representing a forward-looking derivative of the underlying asset) are the trusted crypto conduit that the SEC is comfortable exposing to the NYSE due to its regulated nature – something the Defi (decentralized financial exchange) platforms, in which the untraceable bitcoin trades, cannot claim.

The main issue surrounding this bitcoin exposure conduit is that the futures contracts will have to be continually rolled over to the first month contract, which will cost money and lead to a downgrade in the value of the bitcoin ETF over the next month. over time. You see this type of decline with virtually all commodity ETFs, also based on futures.

Nonetheless, this SEC approval is an important step towards legitimizing the crypto space, gaining unprecedented traction in the market in recent years. Today marked a significant step towards real ETFs supported by Bitcoin, but Gary Gensler and the rest of the fearful SEC will need to be convinced before that happens.

Bitcoin bulls are looking for $ 70,000 (trading below 1% of that level) which would mark a new all-time high for this currency of the future.

Energy concerns

Excessive use of the energy required to power bitcoin mining facilities is gaining increasing attention. Elon Musk is the most notable character voicing concerns about the use of fossil fuels to power digital asset mining operations, deciding to stop the use of Tesla’s TSLA bitcoin earlier this year because of it. . Energy is also the most important variable cost for blockchain-based businesses like Riot, so it is essential to assess an investment in this unique space.

Riot’s main operations are in Texas, ironically one of the cleanest and cheapest energy states (given that it is the oil capital of the United States). The Electric Reliable Council of Texas (ERCOT) is fueling one of the few deregulated energy markets with a broad competitive push towards inexpensive and sustainable sources. Wind and solar account for nearly 30% of ERCOT’s market energy capacity, with low-carbon natural gas producing just over half.

Free market energy in Texas provides Riot with relatively inexpensive variable costs from increasingly cleaner sources.

Final thoughts

Like it or not, bitcoin is here to stay, and it’s time to get exposure to the wallet, if it hasn’t already. RIOT offers us a unique opportunity to gain bitcoin exposure at a significant discount as its stressed profit engine takes off and its controlling market share proliferates.

RIOT has a significant competitive advantage in a market where scale means everything, with its recent acquisition of Whinstone surpassing its hash rate expansion. I would jump on this trade today before the window of opportunity for this high growth rare value game disappears.

Technological IPOs with huge profit potential

Over the past few years, many popular platforms like Uber and Airbnb have finally made their way into the public markets. But the biggest wins have come from lesser-known names.

For example, electric car maker X Peng climbed + 299.4% in just 2 months. Think of it this way …

If you had put $ 5,000 in XPEV when it went public in September 2020, you could have withdrawn $ 19,970 in November.

With record amounts of cash flowing in IPOs and a record stock market, this year’s lineup could be even more lucrative.

View Zacks Tech’s Hottest IPOs Now >>

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report Tesla, Inc. (TSLA): Free Stock Analysis Report Riot Blockchain, Inc. (RIOT): Free Stock Analysis Report Bitcoin ProShares Strategy ETF (BITO): Reports from ETF research To read this article on Zacks.com Click here. Zacks investment research

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