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A cryptocurrency bull market could be on the horizon, and history shows that when prices rise, some stocks tend to significantly outperform major cryptocurrencies. Despite Bitcoin's ( BTC-USD ) recent rally, many of its stocks are still well below their previous highs. However, if cryptocurrencies continue to rise, crypto-related companies could make huge profits.
Of course, corrections or pullbacks are likely as the cryptocurrency market becomes extremely volatile. However, some catalysts are pointing to a tailwind for the cryptocurrency, including long-awaited optimism for the Bitcoin ETF and the April halving, which should provide long-term support for Bitcoin prices. Additionally, interest rate cuts expected in 2024 could provide further stimulus to the sector.
Now is the time to identify stocks that will deliver huge returns amid the looming cryptocurrency craze. There are three I have my eye on in particular, so let's get to them.
Riot Control Unit (RIOT)
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When it comes to pure cryptocurrency mining, Riot Platforms (NASDAQ: RIOT ) remains my top pick for investors who want to experience the inevitable ups and downs of the cryptocurrency market. This company is systematically expanding its Bitcoin mining operations to profit from future highs. Most recently, Bitcoin mining increased by 21% month-on-month, reaching 552 BTC in November.
Riot achieved this throughput with a network hashrate of only 12.4 EH/s. In comparison, the higher the hash rate, the more mining power Riot needs to unlock block rewards and transaction fees paid in Bitcoin. Therefore, when a company's hashrate increases, its production also increases.
Given these recent numbers, it's likely that Riot will see significant performance improvements over time. In June, Riot signed a long-term agreement with MicroBT to purchase 33,280 next-generation Bitcoin miners, primarily for its Corsicana mining facility in Texas. This month alone, the company added another 66,560 miners through a secondary MicroBT order.
These two deals will increase Riot's automated mining hashrate by 26 EH/s, with full deployment expected by mid-2025. At this point, its autonomous mining capacity will approach 38 EH/s. This represents a threefold increase over current levels. This means that Riot not only benefits from rising Bitcoin prices, but also from expanding its market share.
Even though Bitcoin is down 40% from its all-time high, the current cost to mine 1 Riot Bitcoin is $5,537. As of this writing, Bitcoin is trading at over $42,000, providing a nice buffer to Riot's profits. Thus, profitability is likely even if cryptocurrency prices correct. Of course, if Bitcoin goes into a bull market, Riot's profits will be huge.
Digital Marathon (MARA)
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Marathon Digital (NASDAQ: MARA ) is another cryptocurrency mining company taking advantage of Bitcoin's long-term bull market. While Marathon's cost of producing each Bitcoin is much higher than Riot's, at around $19,000 per coin, it's hard to ignore the growth Marathon has achieved in recent quarters.
In the third quarter of 2023, Marathon mined 3,490 bitcoins, a 467% increase from 616 bitcoins in the third quarter of last year. With these gains, the company generated a net profit of $64 million.
Even taking into account the high mining costs, Marathon remains profitable. As Bitcoin approaches $42,000 in 2024, I think the same will happen next year. As the company's network hashrate continues to increase, Marathon appears to be well positioned to benefit from the overall rise in cryptocurrency mining in North America.
Blockchain Hive (HIVE)
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Although Hive Blockchain (NASDAQ: HIVE ) is the youngest of the trio, I view its lag behind Riot and Marathon as an opportunity amid the recent rally. The Hive extension is equally impressive. Since the December update in November, the company has produced 276 bitcoins from mining facilities in Canada, Sweden and Atlantic Canada.
Management noted that the newly acquired Bitmain S19j Pro miners operate at an effective rate of 23 J/TH, so despite the cost of mining each Bitcoin using HIVE, the profitability is around $22,600 (the highest of the three shares offered today). this is not the main reason to care about Bitcoin. They fluctuate at a level approximately equal to twice the cost of commercial activity.
With a cryptocurrency bear market now looming on the horizon, Hive continues to acquire next-generation miners at discounted prices to position itself for Bitcoin's next sustained rally. Hive's Bitcoin price is expected to decline once the hardware goes live in the next 6-12 months.
The ultimate goal is to maintain a break-even level of cash flow production after the upcoming Bitcoin halving in April, before making huge profits as the value of cryptocurrencies rises. As such, HIVE stock represents a riskier but potentially more rewarding cryptocurrency mining theme over the long term if Bitcoin thrives as many experts expect it to by 2025.
At the time of publication, Omar Bin Ihsan did not hold, directly or indirectly, any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's publishing guidelines .
Omar Bin Ihsan is a writer for InvestorPlace. He is a self-taught investor who focuses on growth and cyclical stocks that have strong fundamentals, value and long-term potential. He is also interested in high-risk, high-return investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.
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