Approximately every four years Bitcoin (BTC USD) Mining companies are eagerly awaiting the halving event. According to latest estimates, the next action could take place in April 2024, putting pressure on mining companies' margins as miners' compensation is cut twice. This can also lead to a decline in the value of the main cryptocurrency, which in turn can negatively impact the sales of crypto stocks before the Bitcoin halving.
Hat 8 (HUT-USD)
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The beautiful landscapes of Canada are home Hut 8 Mining Corp's (NASDAQ:HUT) facilities. The climate allows cooling costs to be kept to a minimum. Hydroelectric and nuclear power plants provide electricity and make mining more cost-effective and environmentally friendly.
The company focuses on mining digital assets with a focus on Bitcoin. Data center services and supporting other miners are also part of Hut 8's profit margins, but the finished line of business is still associated with mining the first cryptocurrency. Accordingly, the well-being of the company directly depends on the market situation and the exchange rate of the coin.
Since the beginning of its operations, the company has accumulated experience with unfavorable conditions. The halving of 2020 and the subsequent decline in cryptocurrency prices have shaped its history. Over the past year, the company's shares are up 13%, but are still falling from their 52-week highs. Increased trading activity indicates that there is demand from investors. They paid attention to the company's recent power plant purchases, but may have missed the impact of the Bitcoin halving.
From now on the situation could look rosy. The high market cap of $1.20 billion, the construction of a new digital asset mining site in Texas, and an optimistic two-week stock price chart provide reassurance to holders of this asset.
Still, HUT is among the crypto stocks to sell before the Bitcoin halving as the preparation was weaker compared to the previous halving. After the reward for mining new blocks was halved from 12.5 BTC to 6.25 BTC in May 2020, only the company's operational measures were able to offset the decline in profitability. In 2024, Hut 8 has not diversified its revenue enough to get through April with a stable share price.
Additionally, it is important to remember that the company operates in a competitive environment and cannot guarantee that the Bitcoin correction will not coincide with the timing of the coin sale.
Riot Platforms (RIOT)
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The focus is on blockchain technology Riot Platforms (NASDAQ:REVOLT) universe. Until 2023, the company was called Riot Blockchain and the rebranding affected both the focus on blockchain platforms and the brand positioning. The presence of Bitcoin mining in the company's revenue structure remained unchanged. The project's mining capacity is growing every year as Riot has decided to increase its share of the Bitcoin network's hash rate. To this end, the company is constantly optimizing processes and purchasing new equipment.
From 2017 to the last halving, RIOT fell more than 97% to $1.14. Problems with the Securities and Exchange Commission (SEC) reinforced the company's perception of it as a major debtor. For example, the net loss in 2018 was $60.2 million.
The company continues to face financial challenges. In 2024 it is struggling with rising costs and strategic uncertainty. The cost of Bitcoin mining is rising and in the coming weeks the wages for this work will be halved. Strategically, the company is targeting a hashrate of 100 Exahash operations per second (EH/s). The downside to this plan is the potential doubling of equipment depreciation costs after the halving.
In less than two years, Riot's cost of doing business per Bitcoin mined has increased 2.5x. In the fourth quarter of 2021, this value was $44,400 and in the third quarter of 2023 it was $110,000. Continuing the trend could cause RIOT to falter, which is why it is among the crypto stocks to sell ahead of the Bitcoin halving.
Canaan Creative Inc. (CAN)
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The words “mining” and “artificial intelligence” largely describe the customers of Canaan Inc. (NASDAQ:MAY). The company develops high-performance microchips to meet the needs of these areas and seeks (as its mission statement states) to use its technology for social enrichment.
After falling below $2 in 2020, the company's shares rose to over $34. This surge in 2021 was not repeated even during the initial AI hype. CAN has slowly fallen to the current level, which is close to $1.5.
Four years ago, experts also warned that CAN was among the crypto stocks to sell before the Bitcoin halving. 2020 brought difficulties for Kanaan in the form of logistical disruptions around Chinese New Year, a 48% decline in cash reserves and a deterioration in overall investment attractiveness. Net losses reached $5.6 million at the start of 2020, prompting investors to consider other companies in which to invest.
Spring 2024 brings a tense geopolitical situation for the company. Canaan's location in China is irrelevant due to changing supply chains and increasing bans from Western countries. Although the coronavirus is no longer as harmful as it was in 2020, competition from strong players and the upcoming Bitcoin halving could bring unpleasant surprises for CAN holders.
At the time of publication, Julia Magas did not hold, directly or indirectly, any positions in 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.
Julia Magas is a writer who covers the latest trends in finance and technology. Her work is published in a number of financial media outlets such as Nasdaq, Cointelegraph, Investing, SeekingAlpha, FXEmpire and Beincrypto. She primarily covers cryptocurrencies and blockchain technology with a focus on market performance, innovations and trends.
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