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This article will compare, from a technical perspective, a few of the crypto mining stocks we follow closely at Crypto Waves. Specifically, we will take a look at (RIOT), (MARA), (CIFR), (CLSK), (HUT), (BITF), (HIVE), and (BTBT).
Since the summer highs, stock prices in the above list have lost between 56%-64% of their value from peak to (current) trough, in under three months! In roughly the same time frame, BTC has dropped 21.75% (from peak to (current) trough).
From a technical standpoint observing key oscillators, this class of stocks has reached very oversold levels, but are they investable? In our view on that matter, no. However, that does not mean the same as us ruling out the prospect of some very high return swing trades developing to the upside. In their current patterns, we view upside trades as quite speculative but we will lay out conditions for a prospective more attractive upside setup in a few of the miners.
The business of crypto mining is essentially companies hoping to capture the surplus value from generating newly minted coins vs. the cost of “mining” the block, which would convey to the “miner” newly minted coins as a reward. The costs consist of investment in capital expenditure in “Mining Rigs,” which are dedicated computer systems designed to perform the complex calculations required for mining. These rigs consist of multiple high-performance graphics processing units (GPUs) or application-specific integrated circuits (ASICs) that can handle the intense computational workload. The main operating cost is the power required to perform the computational workload.
Bitcoin (BTC-USD) undergoes a halving cycle roughly every four years. The event is referred to as a “halving” because when it takes place, the reward for each block mined is reduced to half of what it was preceding the event. The next expected halving is roughly six months away. Though we will not provide a deep dive into performance metrics of this industry, at the current BTC price and mining reward, this is not a profitable industry.
Much like precious metals miners, the earnings of these crypto mining businesses are strongly correlated to market prices in the underlying commodity being mined, in this case, we are primarily talking about Bitcoin.
Our thesis on BTC remains bullish. Fibonacci support ranges down to the $20k region, and so long as no sustained or meaningful break below this region develops, our confident expectation is for BTC to climb to the $40k-$49k region. Though I have less conviction about BTC moving directly above the 2021 high, and into $100k+ territory, without any breaks below the 2022 low, a technical setup has emerged for this prospect.
That said, while the thesis in BTC is more confidently bullish, especially in the long run, in which we do have strong conviction about moves well north of $100k, we can’t convey a strong investment grade thesis for the miners.
From a technical standpoint, though most miners had enormous gains from the pandemic lows into all-time highs and have held higher lows in the retrace into last year’s low, the patterns do not convey any confident prospect of reaching new all-time highs. Similarly, though the bounces from the 2022 lows into this year’s high have produced staggering gains, the patterns do not convey a confident prospect of exceeding the 2023 highs, let alone all-time highs.
The only positive aspects to report are that:
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the charts are very oversold (but certainly can continue to become more oversold) and
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(more importantly) some of these charts are displaying very corrective patterns in their declines off the 2023 highs. This is suggestive of these securities prospectively holding a higher low (above the 2022 low) and forming another rally segment to exceed the 2023 highs but without confidence to reach or exceed the all-time highs.
In the group with corrective decline patterns are the following tickers: MARA and CIFR. On the other hand, there are RIOT, HIVE, and BTBT. These all appear to have formed impulses from the summer highs which is very challenging to a prospective sustained bullish thesis, beyond a dead cat bounce. What’s particularly peculiar with RIOT and BTBT is that, while these have retraced considerably less of their rallies from last year’s low (while their patterns are most suggestive of downside follow-through), which sends a mixed message of sorts.
Of the remaining names mentioned near the heading of the article, HUT and BITF have patterns that appear to favor general downside continuation (with some corrective bounces) but that are less clearly impulsive to the downside. BITF possibly has 5 waves down already, but another corrective bounce followed by a lower low would make that pattern significantly…
Read More: Where We See Crypto Mining Stocks Headed (Cryptocurrency:BTC-USD)