Among individual stocks, they don’t get much more crypto-correlated than bitcoin miners. As such, it’s not surprising those equities were repudiated in 2022.
Although bitcoin and other digital currencies are rebounding in early 2023, the asset class is still in a fragile place, prompting many miners to reassess their business models. Should those companies prove successful in the business model diversification effort, exchange traded funds such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO) could benefit.
SATO follows the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts, and ETPs Index – a benchmark that’s home to a variety of bitcoin miners. Several of SATO’s components are already taking steps to prove to investors these companies are about much more than crypto mining. Take the case of Riot Platforms (NASDAQ: RIOT), SATO’s fifth-largest holding at a weight of 4.63%. That company changed its name as one of sign of its diversification efforts.
“It is not the only firm making a name change. In the past year, miners have worked to diversify their revenue streams into other products and services using energy-intensive data centers. Some did so in response to brutal market conditions while others took steps to prepare for a downturn when business was still going strong,” reported Eliza Gkritsi for CoinDesk.
As CoinDesk points out, bitcoin is comparable to mining traditional commodities. It’s capital intensive and there’s a finite amount of product to be mined. While the total amount of, say, gold or silver reserves in the world isn’t known beyond a shadow of a doubt, it’s not up for debate that there only about 2 million more bitcoin left to be mined.
Add to that, bitcoin mining becomes more difficult and costlier as more supply is mined. Those are compelling reasons for miners, including SATO member firms, to add fresh sources to their revenue streams.
Count Hut 8 Mining (HUT) and Hive Blockchain Technologies (HIVE) among the other SATO components that reaching beyond crypto mining to add new businesses. In the case of Hive, that company is looking to broaden its footprint in the cloud computing space.
Hive’s “cloud offering is 25 times more profitable than mining, when measured in dollars per electricity consumption, given current market conditions, has an annual revenue of $1 million on a run-rate basis, the company said on Tuesday. Hive has a fleet of 38,000 GPUs and is currently using 450 of those for its cloud proof of concept, which consume about 80 kilowatts (KW) to make $3,500 per day,” according to CoinDesk.
For more news, information, and analysis, visit the Crypto Channel.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.