HIVE Blockchain (NASDAQ:HIVE) is among my favorites in the Bitcoin mining sector, even though I have positions in a number of other miners. The reason why is because it's cleaner to me, and fairly predictable concerning its share price movements, even under the most volatile conditions.
In this article, we'll look at where the company stands now in regard to its share price, its financial position, and why I believe it's going to be a multi-bagger in the months and years ahead.
As with all crypto miners, HIVE has participated in the sell-off and price decline, falling from $2.32 on March 29 to $1.55 on April 27. Within the parameters of my trading plan, I've been buying up a lot of shares recently, lowering my cost basis to a very desirable place.
I've traded HIVE Blockchain for a long time, and it is now trading at the lowest it has been since December 2020. Now is the time to look seriously at opening a position in HIVE, even if its share price drops further, which I think is probable.
My thought is the price of Bitcoin (BTC-USD), which determines the price movement of HIVE, could drop into the low $30,000s, or possibly high $20,000s. I think the latter is the most likely to happen, and so am investing accordingly.
If Bitcoin does drop into the low to mid-$30,000s, HIVE will probably trade in a range of around $1.05 to $1.35, depending on where Bitcoin ends up bottoming at. With that in mind, an entry point in the low $1.60s is a solid place to start building a position. Below the $1.60s is even better. I've been able to grab some shares at those levels over the last few days.
The key is to position size with discipline and be patient in waiting for the price of Bitcoin to drop. Even if it doesn't, getting in at around $1.60 or lower will result in some nice returns.
And if you get in and the price keeps dropping, don't be concerned, the share price of HIVE can rapidly recover when leveraging the upward price movement of Bitcoin.
The balance sheet of HIVE looks solid based upon the last earnings report, positioning the company well for whatever the market gives it. If it continues to drop, it has more than enough resources to endure a prolonged downturn. And if it goes the other way (which eventually it will), it's ready to run in conjunction with the positive momentum.
At the end of calendar 2021, it had $63.7 million in cash on hand, investments of $26.7 million, and digital currencies valued at $168.1 million. Total liabilities at the time were a modest $15.4 million, as the chart below shows.
The hash rate (probability of earning Bitcoin) for HIVE in the quarter ended December 2021 was an increase by 35 percent for Bitcoin, and 14 percent for Ethereum (ETH-USD).
One area that attracts immediate concern when looking at it is the significant decline in the production of ETH from the third quarter of 2021 to the third fiscal quarter of 2022. As shown below, it plummeted from 21,500 to 7,100 during that period of time. The good news is the increase in the price of Ethereum easily offset the drop in production.
A look at the chart below shows that the mining revenue during that time soared from $13.7 million to $68.2 million, while its gross mining margin jumped from $10.6 million to $61.4 million.
As I'm writing, Bitcoin could drop another $9,000 and the price would be around the price it was on July 20, 2021. The same with Ethereum. It could shed another $1,200 and still trade at the level it was on July 20, 2021.
The point is, even if that's how it works out, HIVE would still be about even, with little but upward momentum ahead of it. I don't think prices will drop that low, but even if they do, HIVE has the balance sheet to more than survive the temporal conditions it would face under what I consider to be the worst-case scenario.
Based upon the inevitable rebound in the price of Bitcoin, the 52-week high of $5.60, ongoing increase in hash rate for Bitcoin and Ethereum, and getting in at very favorable entry points and cost basis, I see HIVE having the potential to be a multi-bagger in the months and years ahead.
Once economic sentiment improves, I expect a period of sustainable upward momentum for HIVE until or when we hit the next recession. In that time, I see the price of HIVE easily doubling at its current share price, and could be a 3-bagger over the next year, depending on the price of Bitcoin in particular. For long-term holders, I believe it is an 8-bagger, or possibly more.
I have no doubt those results are highly probable, as long as HIVE correlates with the price movement of Bitcoin. I believe the next big run of Bitcoin will surpass previous records, and could challenge the $100,000 mark over the next several years, depending on what type of recession we have in depth and duration.
One last thing that few people are talking about is the possibility that some of the altcoins could decouple from the price movement of Bitcoin as uses proliferate in the months and years ahead. It's also probable that once proof of stake is implemented for Ethereum, the price could enjoy a significant rebound; one that could, in part, be sustainable. If that's how it plays out, HIVE will enjoy even more profitability going forward.
It's my belief that after this correction in the crypto space is over, we may never see the entry points we are seeing for HIVE at this time. As mentioned earlier, I'm not suggesting we're at a bottom, because I don't think we are yet, what I am asserting is this is an excellent time to build a position in the company.
While building a position in the way I mentioned earlier in the article could limit the upside some, in the end, under these market conditions, I think it's best to build a position in HIVE in a defensive way, by which I mean adding to a position incrementally if the price continues to fall. It's tempting to go all-in at these prices, but investors could be tempted to sell if the price drops rapidly, rather than hold on.
As for the drop in production in Ethereum, that doesn't concern me at all. Even under the current economic conditions it has held up quite well, and over time, I see moving much higher from here. It also appears the company is going to boost the number of Bitcoins mined, which will more than offset the lower production numbers.
A strong balance sheet and growing hash rate suggests to me HIVE will be strong defensively and offensively for a prolonged period of time. In my view, there is not a better time to buy some shares and let time work in our favor.
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Disclosure: I/we have a beneficial long position in the shares of HIVE either through stock ownership, options, or other derivatives. 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.