Analysis of the top stock picks to sell after the Bitcoin halving, with insights into mining revenue and impact on shareholders
The fourth Bitcoin (BTC USD) The halving planned for mid-April 2024 is likely to have a significant impact on the crypto market. It is crucial to understand how the halving will impact Bitcoin price dynamics and crypto mining, especially when choosing which stocks to sell after the halving.
The three tips we'll explore focus on different niches. Two are crypto miners and one is a company that believes Bitcoin is better than gold. Assuming Bitcoin price remains stable, the two miners will see an immediate drop in revenue after the halving. This is because miners who perform the same amount of computing power will earn fewer Bitcoins after the halving. Two other factors also make the shares unattractive: shareholder dilution and declining Bitcoin production.
MicroStrategy (MSTR)
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Microstrategy (NASDAQ:MSTR) is an example of the type of companies to keep an eye on when researching stocks to sell after the halving. MSTR is known for its aggressive stance in buying and holding Bitcoin and will have a significant impact after the Bitcoin halving.
The strategy is starting to take effect. When MSTR launched a new $500 million convertible note in early March, markets reacted negatively. The stock reported a 7% decline following the announcement, suggesting investors are tired of loading up the digital asset with debt.
However, MicroStrategy founder Michael Saylor remains a passionate supporter of Bitcoin accumulation. He believes that the digital asset will “eat” gold because it has all the positive properties of the metal and none of the negative ones.
With the latest purchase, MicroStrategy now owns around 1% of all Bitcoin, or 214,246 Bitcoins. To put things into perspective, there are a total of 21 million Bitcoins available for mining, of which 19.7 million are in circulation. Overexposure to an asset class is bad, but it becomes even worse when it is volatile, such as Bitcoin.
Short sellers Kerrisdale Capital also criticizes MicroStrategy for being overvalued due to its significant Bitcoin holdings. The investment firm claims that the inflated share price is the result of MicroStrategy's decision to value its Bitcoin assets at $177,000 per token, well above the current market price. According to Kerrisdale, there are more attractive investment opportunities than MicroStrategy when it comes to access to digital assets.
The report suggests that MSTR stock deserves a valuation between $700 and $800 per share. The number is well below the last closing price of around $1,700.
Argo Blockchain (ARBK)
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Argo Blockchain (NASDAQ:ARBC) has the potential to become one of the biggest losers as we approach the Bitcoin halving in mid-April and mining efficiency declines at a critical point.
ARBK announced a 20% decline in daily Bitcoin production in January. As a result, mining revenue fell from $6.6 million quarter-on-quarter to $5.3 million in January, a decline of 19%.
A 16% drop in Bitcoin's hash price and, to a lesser extent, weather-related delays contributed to this decline.
It is noteworthy that increasing network difficulty and lower transaction fees on the Bitcoin network caused the hash price decline. These elements suggest a difficult operating environment for miners. Changes in transaction fee revenue and network difficulty can significantly impact profitability. Given the current situation, things will not get better for Argo Blockchain after the halving.
Shareholder dilution is the other major issue facing Argo investors. There are currently 523.5 million shares issued for ARBK, a significant increase from 293.8 million shares in December 2018. This is not a crypto-specific issue; rather, it's about management's growth strategy. However, with markets in volatile mode ahead of Bitcoin's fourth “halving” in April, this is a stock to sell.
Iris Energy (IREN)
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Iris energy (NASDAQ:IRISH) is in the same boat as ARBK, suffering from a slowdown in Bitcoin production and significant shareholder dilution.
In contrast to 341 Bitcoins mined in January, IREN mined 310 Bitcoins in February. The operational hash rate for the entire month was 7 exahashes per second (EH/s).
Mining revenue rose to $15.2 million month-to-date from $14.5 million in January. The main reasons for this increase in sales are the higher average hash rate of 6.3 EH/s and the increase in Bitcoin price to $49.1k. These factors suggest that although fewer Bitcoins were mined, the value of production was higher due to favorable market conditions.
IREN is also notorious for using equity offerings to drive organic growth. The most recent report says there are 84.4 million shares outstanding, which is 660% more than the 11.1 million shares reported in June 2019.
Finally, the lack of Bitcoin holdings is another factor that will likely cause investors to avoid IREN. These significant holdings are likely to help like-minded people Riot Blockchain (NASDAQ:REVOLT), Marathon Digital Holdings (NASDAQ:MARA), And CleanSpark (NASDAQ:CLSK). All have significant amounts of Bitcoin in their portfolios to complement their mining activities. In the event of a halving, Bitcoin is predicted to rise.
As a result, companies like RIOT, MARA, and CLSK will benefit more from a halving. This makes them potentially better investments than IRISH.
As of the date of publication, Faizan Farooque had no positions (directly or indirectly) in any of the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's publication policies.
Faizan Farooque is a writer for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in stock market analysis and is a former data journalist at S&P Global Market Intelligence. His passion is helping the average investor make more informed decisions about their portfolio.
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