Highlights:
- On March 11, MicroStrategy used proceeds from the issuance of convertible notes to purchase 12,000 BTC, increasing its Bitcoin holdings to 205,000. Since February, it has completed two additional acquisitions of 850 and 3,000 BTC.
- In February 2024, Marathon Digital Holdings launched Anduro, a network of Bitcoin sidechains. The company also launched Slipstream, a direct transaction submission service to process large or non-standard Bitcoin transactions using its pool.
- On March 4, 2024, Bitdeer Technologies Group introduced the SEAL01, a new 4nm Bitcoin mining chip with a power efficiency of 18.1 J/TH. It will be used in the company’s upcoming SEALMINER A1 machines, enhancing the efficiency of its mining operations.
Forecast
As the upcoming Bitcoin halving will cut block subsidies in half, the mining profitability will temporarily decrease. This might lead to larger miners acquiring smaller ones that are under financial strain. The halving also increases Bitcoin’s scarcity, an opportunity MicroStrategy plans to leverage by purchasing more Bitcoin to benefit from its rising value and further enhance its stock price and shareholder value.
Sentiment
Miners are investing in new equipment to increase hash rates and actively acquire Bitcoin mining sites as the halving approaches. Despite these efforts, many companies are seeing a month-over-month and year-over-year reduction in Bitcoin production. It remains to be seen how Bitcoin’s price surge can offset these production declines and how both will affect corporate balance sheets.
Analysis
Between Feb. 12 and March 11, MicroStrategy and Coinbase stocks stood out with significant price increases of 122.06% and 73.88%. In contrast, most crypto stocks were on a downward trajectory at an average decline of -20.54% (Figure 1). Notably, CleanSpark’s stock also rose by 97.25%, but this growth was confined to the first two weeks of February, after which its price remained stagnant.
MSTR’s price increase is due to the strong performance of Bitcoin (BTC), for which it is an investment vehicle. The company has consistently diluted its share base and taken on debt to buy more Bitcoin, boosting the number of Bitcoin held per share. On March 8, the company completed an $800 million private auction of convertible notes at 0.625% interest to mature in 2030. Shortly after, they announced another private offering to raise an additional $500 million through convertible senior notes due in 2031. During a multi-year Bitcoin uptrend, MSTR thus becomes the only exchange-traded asset that can reliably outperform BTC. Since Jan. 1, 2023, not only has MicroStrategy’s share price increased by 936.79%, but it has also expanded its Bitcoin holdings from 132,500 to 205,000 and is currently sitting on a profit of over $7.7 billion. (Figure 2)
Cryptocurrency exchanges, like Coinbase have also capitalized on Bitcoin’s sharp price increases. The company’s recent performance can be attributed to its Q4 2023 results, which exceeded expectations with a 1,255.56% surprise (Figure 3). This outcome was driven by higher transaction revenue from increased trading volumes and retail investor activity. Additionally, its role as custodian for eight newly approved ETFs also contributed to its financial performance.
Some miners are among other companies that have benefited from the price performance of Bitcoin. For instance, CleanSpark reported a 165% increase in its year-over-year revenue for Q1 FY2024 in February. The company also saw a 12.5% increase in Bitcoin production in February compared to the previous year and expanded its operational hash rate from 10 to 16 EH/s within one month. This was achieved by acquiring and integrating three new facilities in Mississippi to reach a 20 EH/s operational hash rate by the first half of 2024.
However, most mining companies, including Riot Platforms, Bitfarms, and HIVE, saw a downturn in Bitcoin production, both month-over-month and year-over-year. Because mining businesses make up the majority of publicly traded crypto companies, this has dragged the average performance of crypto stocks down this month.