HIVE Blockchain Technologies (HVBTF) And The Crypto Wild West

13.32K Followers

Summary

Why HIVE Blockchain Technologies will continue its volatile, but upward climb.
While primarily a pure play on ethereum, its bitcoin operations doubled in the last quarter.
A couple ways to play the miner - whether you're trading or holding.
Over time, the numbers for HIVE should continue to improve, taking into account some quarters will be weak because of price volatility.
Rising crypto prices, an increase in capacity, and wider margins point to a potentially strong performance going forward.

It's been a few months since I last wrote about HIVE Blockchain Technologies (HVBTF). With the big jump in the price of ethereum and the accompanying volatility, I thought it would be a good time to take a look at the crypto miner.

HIVE Blockchain Technologies is a direct play in the crypto space, with its focus on mining ethereum and secondarily, bitcoin. Over the last six months the company's share price has soared by over 1,000 percent. For those in it for the long term, HIVE is definitely worth holding and buying on the dips.

HIVE has mining facilities located in Canada, Iceland and Sweden. It is looking at expanding capacity at all of the locations; that and the expected increase in the price of ethereum and bitcoin going forward, suggests revenue continuing to increase. The company sees the annual growth rate of spending on blockchain to grow at a rate of about 60 percent through 2023.

In this article we'll look at its recent performance, some of the numbers from its latest earnings report, and a couple of ways to play the stock, whether you're trading it or holding for the long term.

Numbers improving

With the soaring price of ethereum, and to a lesser degree bitcoin (as it relates to the impact on the performance of HIVE), it wasn't hard to see that the numbers were going to improve in the company's earnings report, and that's how it predictably played out.

In the third quarter ended December 31, 2020, HIVE mined 21,500 ethereum and 165 bitcoin. In the prior quarter the company mined 32,800 Ethereum and 89 Bitcoins. While the number of bitcoins is comparatively small as measured against ethereum, when you measure the price of bitcoin against previous quarters, the boost in revenue from bitcoin was meaningful.

The price of ethereum more than doubled from Oct. 1, 2020 to December 31, 2020. The combination of soaring ethereum and bitcoin prices helped the company to improve many of its numbers, taking into account it really started soaring after the new year, which means the numbers going forward are going to be outstanding for the current quarter, and the remaining quarters of 2021.

In the reporting period the company generated $13.71 million from digital currency mining, up 174.2 percent year-over-year. Gross mining margin in the quarter was 78 percent. That should improve for all of 2021 based upon the expected high prices of ethereum and bitcoin. Overall revenue for the first three quarters of fiscal 2021 was $28 million, or $0.08 per share. For Q3 it was $0.05 per share, on net income of $17.2 million, up significantly from $0.01 per share on $3.4 million in revenue during the same reporting period last year.

At the end of calendar 2020, HIVE had working capital of $23.2 million, with digital currencies valued at $15.0 million.

HIVE Executive Chairman Frank Holmes said the company has been producing, on average, approximately 20,000 ethereum coins per quarter. As for the increase in the number of bitcoins mined in the quarter, that came primarily from the acquisition of the mining facility in Quebec. Holmes also noted that the company had upgraded over 60 percent of its mining equipment from 4 Gigabyte to 8 Gigabyte. That's important because even with the upgrades, the rising price of ethereum and bitcoin offset some of the costs associated with the upgrades, underscoring the expected powerful improvement in the performance of the company for the next couple of years.

Some ways to play HIVE

For the readers that are hodlers, it's not too difficult to know how to play HIVE. You take a position and hold it... not hard to comprehend or do. Even so, getting in at good price points or adding to positions on dips is important for generating superior returns.

For those that got in near the current peak price of ethereum and HIVE, I wouldn't sell in a panic. As mentioned, you can lower your cost basis by averaging down, or if you don't have any extra capital, just be patient and wait while you hold; the price is going to come back over time, continuing its upward move.

I have traded HIVE in the past, and something to take into account there is it can at times act similar to precious metals miners, especially silver. What I mean by that is there can be a delayed reaction to the price of movement of ethereum by HIVE, just like there is with silver miners in particular.

The last time I traded HIVE I got out way too soon, even though I knew it was possible it would take off as the price of ethereum climbed. I got in at $2.01 per share, and sold it for a small gain. Typically, not too long afterwards it jumped to over $5.00 per share.

I got out because the share price of the company remained stubbornly low as the price of ethereum started to move up over several days. Since I do a lot of speculative trading, I didn't want to keep my capital tied up too long. In hindsight that was an obvious mistake, as it would have definitely been worth more than doubling my investment in the company.

The key thing for day traders and swing traders to keep in mind is there is at time delayed responses to the price movement of ethereum by HIVE. Since the increase in the price of ethereum is about as certain as you can get, it can be traded a little differently than companies moving on news that will usually only provide temporary up or down share price movement.

Conclusion

There is one major thing to consider when taking a position in HIVE: there will be a lot of volatility in the share price of the stock, so those in it for the long term should continue to hold on to their shares even with the volatile the price swings.

For that reason I would have some extra capital on hand in order to grab some bargain-basement prices when the stock takes a temporary dive.

Traders of course can make a lot of money when the stock market corrects by adding to their position, and then make even more when it begins to recover because the cost basis in the stock is lowered.

Anything of course can happen, and things could go against shareholders, but there would have to be an extraordinary and unforeseen outlier for that to be how it plays out over the next couple of years, based upon the majority of experts in the crypto field that have given their views on price expectations in the crypto segment.

With the price of ethereum on the rise, and the increase in the impact of bitcoin on the performance of HIVE, the next two to four years should generate solid returns for those in it for the long haul. With the increase in capacity and wider margins from higher prices, HIVE is poised to deliver some solid numbers. Remember that certain quarters could be weaker than others if there is a prolonged period of a price drop and consolidation. Yet in this quarter the price of ethereum has proved resilient, even with the correction it has been going through. With little in the way of competition, I don't see anything over the long term that will change the growth narrative for HIVE. I'm looking forward to seeing how the boost in prices of both ethereum and bitcoin will impact the earnings of HIVE in the quarters ahead.

This article was written by

Gary Bourgeault

13.32K Followers

I am a former investment advisor and owner of several businesses. These days I invest only for myself while continuing to write on a variety of financial and economic topics.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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