Bitcoin is a decentralized and cryptography-based digital currency that operates without the need for intermediary financial institutions like banks or brokers. It has grown to a market capitalization of C$1.7 trillion as of April 18, attracted investments from hundreds of publicly available stocks, and has posted returns of 113.14 per cent year-over-year, and approximately 20,000 per cent going back a decade, currently trading at about C$87,000 per coin.
The cryptocurrency operates through a blockchain, which is a ledger that records transactions between Bitcoin users. To validate transactional data on a block and add it to the blockchain, miners must compete to solve complex equations, with the winner receiving a pre-determined amount of Bitcoin.
With the upcoming halving expected on April 19-20, 2024, miners will suffer a 50 per cent reduction in Bitcoin rewards for each block they add to the cryptocurrency’s blockchain. Halvings occur every four years and will continue until capping the supply of Bitcoins at 21 million in 2140.
Logically, halvings have an inflationary effect on Bitcoin’s price, and they have proven this out in practice with triple-digit rallies the past three times it happened in 2020, 2016 and 2012. These rallies are, in turn, reflected in Bitcoin and crypto-related stocks, making it an opportune time to highlight top performers and why they might merit an allocation.
The top 10 Bitcoin stocks and ETFs to consider before the halving
1. Grayscale Bitcoin Trust
The Grayscale Bitcoin Trust invests exclusively and passively in Bitcoin, saving investors the hassle of buying, storing and protecting Bitcoin directly. The fund has accumulated a little more than US$19.5 billion in assets under management, which translates to about 310,000 Bitcoins, making it the world’s largest Bitcoin ETF. Investors will need to pay a steep total expense ratio of 1.5 per cent to own the fund, but benefit from unparalleled experience because GBTC was the first fund to make Bitcoin publicly available in 2013.
The spot Bitcoin exchange-traded fund (NASDAQ:GBTC) last traded at US$56.44 per share and has added 229.29 per cent year-over-year.
2. CleanSpark
CleanSpark, market capitalization US$3.8 billion, is a Bitcoin miner that owns and operates low-emissions data centres. The company has deployed 106,000 miners as of February 2024, with a full deployment capacity of 215,000 miners and an option for an additional 100,000. The company holds 3,573 Bitcoins in treasury and is well-funded with US$74 million in cash to reach a projected hashrate of 50 EH/s by 2025.
The Bitcoin mining stock (NASDAQ:CLSK) last traded at US$16.28 per share and has added 223.65 per cent year-over-year.
3. Fidelity Advantage Bitcoin ETF
The Fidelity Advantage Bitcoin ETF (TSX:FBTC), with C$424 million in AUM, holds a little more than 5,000 Bitcoins and benefits from vertical integration, making use of Fidelity’s in-house storage capabilities, as well as the company’s well-established history in active management dating back to the 1940s.
FBTC charges a high management expense ratio of 0.95 per cent, but has more than made up for it with year-over-year returns of 114.03 per cent, last trading at C$28.83 per share.
4. Galaxy Digital Holdings
Galaxy Digital Holdings, established in 2018 and now with a market capitalization of C$3.87 billion, is one of the largest digital asset and blockchain investors and advisors. It serves institutions, startups and qualified individuals through a diversified suite of services, including trading, lending, strategic advisory services, proprietary Bitcoin mining and hosting, network validation and enterprise crypto custody.
The crypto investor and asset manager’s sporadic profitability, which can be attributed to crypto’s high volatility, undersells its trusted reputation as a go-to source for industry insights.
Galaxy stock (TSX:GLXY) last traded at C$11.60 per share and has added 109.39 per cent year-over-year.
5. Ishares Bitcoin Trust
The Ishares Bitcoin Trust, like Grayscale and Fidelity’s product above, provides exposure to Bitcoin within traditional investment accounts like RRSPs, TFSAs, 401Ks and Roth IRAs. The fund has accumulated US$16.6 billion in AUM, or just over 270,000 Bitcoins, making it the world’s second-largest Bitcoin ETF, while charging a fee of just 0.25 per cent, which is comparable to broad-market stock index funds.
IBIT last traded at US$36.06 per share and has added 64.58 per cent since January 2024, backed by the rarified air of parent company BlackRock being the largest asset manager in the world at more than US$10 trillion.
6. Bitfarms
Bitfarms, established 2017 and now with a market capitalization of C$940 million, is a global Bitcoin miner operating 11 facilities and developing two others across Canada, the United States, Paraguay and Argentina. The Bitcoin stock uses predominantly hydro-electric power, benefits from long-term power contracts and has been expanding its fleet in anticipation of the Bitcoin halving, maximizing margins and positioning investors to benefit from leverage to increases in the Bitcoin price.
The crypto miner held 806 Bitcoins in treasury as of March 2024, in addition to US$123 million in available liquidity, granting it a sufficient runway to triple its hashrate to 21 EH/s by the end of this year.
Bitfarms stock (TSX:BITF) last traded at C$2.59 per share and has gained 56.97 per cent year-over-year.
7. Cipher Mining
Cipher Mining, market capitalization US$1.14 billion, is a Bitcoin miner developing and operating data centers in the United States.
According to the company’s operational update for March 2024, it holds 1,741 Bitcoins in treasury and has deployed 70,000 miners across four sites, with a combined month-end hashrate clocking in at 7.6 EH/s.
Cipher is working on numerous site expansion initiatives for Q2 2024, as it progresses towards bringing its new 300 MW Black Pearl facility online in Q2 2025.
CIFR stock last traded at US$3.70 per share and has added 33.27 per cent year-over-year.
8. Marathon Digital Holdings
Marathon Digital Holdings, market capitalization of US$4.42 billion, is a North American digital asset technology company focused on supporting and securing the Bitcoin network, including through large-scale and sustainable mining operations.
The company has more than 225,000 miners across 11 sites around the world operating at a hashrate of 27.8 EH/s, representing 4.5 per cent of the entire Bitcoin network.
It held 16,930 Bitcoins in treasury and US$425.6 million in unrestricted cash and cash equivalents as of February 2024 and has reduced its long-term debt by 58 per cent year-over-year through Q4 2023 from almost US$800 million to US$325.7 million.
Marathon Digital stock (NASDAQ:MARA) last traded at US$15.07 per share and has added 29.01 per cent year-over-year.
9. Hut 8
Hut 8, established in 2011 and now with a market capitalization of C$922 million, is a North American Bitcoin miner and computing infrastructure provider offering exposure to nine mining facilities, five high-performance computing data centres and four power-generation assets in Ontario.
The pioneering player in the Bitcoin space had 241,600 total deployed miners under management and held 9,102 Bitcoins on its balance sheet as of March.
Recent restructuring measures position Hut 8 to make the most of Bitcoin volatility, whether up or down, with en emphasis on maximal efficiency at reduced cost.
Hut 8 stock (TSX:HUT) last traded at C$10.86 per share and has lost 20.73 per cent year-over-year.
10. HIVE Digital Technologies
HIVE Digital Technologies, established in 2017 and now with a market capitalization of C$400 million, owns digital asset mining facilities in Canada, Sweden and Iceland, in addition to 38,000 Nvidia graphics processing units to power artificial intelligence applications and build out its new cloud service, HIVE Cloud.
The crypto miner held 2,315 Bitcoins as of April 4 that are worth about C$200 million at Thursday’s price, and expects to onboard more than 10,000 miners before and in the months immediately after the halving event, bringing its hashrate to 5.5 EH/s, and granting it added flexibility to maximize mining margins regardless of market environment.
HIVE stock (TSX:HIVE) last traded at C$3.59 per share and has lost 31.88 per cent year-over-year.
The outsized risk at the heart of Bitcoin’s investment prospects
If, like many Bitcoin enthusiasts, you support the cryptocurrency’s potential to reduce barriers into the financial system for the underbanked and unbanked, and believe this potential will continue to translate into wider adoption and price appreciation, it would be reasonable to temper your convictions with a handful of facts:
- Bitcoin was launched only in 2009, making its return history unreliable for future expectations, unlike the 150 years of data available for the S&P 500
- The cryptocurrency has been officially recognized as a currency by only one country, El Salvador, with mixed results
- Huge regulatory risk exists, with China having banned crypto trading and mining since 2021, setting a precedent for other powerful countries to do the same to safeguard their national currencies, at the expense of investors experiencing a total loss
For these reasons, it’s hard to argue for anything but a minimal allocation to crypto, whether directly or through stocks, unless you possess specialized knowledge that offers you an edge against other investors.
What does your crypto portfolio look like? How are you positioned for the Bitcoin halving?
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