Selling cryptocurrency that makes attractive opportunities to emerge in the bear market, according to analysts

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Crypto investors may be feeling down over the past few months, but Stifel GMP sees attractive opportunities for savvy traders in the current bear market for well-capitalized operators.

The research firm has lowered price targets for the cryptocurrencies it covers after the month of October proved challenging for mining operators, but remained optimistic about certain opportunities in the sector.

While the network’s hash rate continued to march to new record highs, Bitcoin traded somewhat sideways, the analysts noted. Meanwhile, Ethereum’s long-term staking strategies make it attractive to investors, Stifel said.

READ: First Quantum Minerals is a ‘buy’, says broker Stifel GMP, despite cost pressures and lowered full-year production guidance

In a note, the broker said that the overall network hash rate is currently hovering around 262 exahash per second (EH/s) – an increase of around 17% since early September – while the spot price of Bitcoin is around US$20,500, down from 21,700 US$. .

“We continue to see our top picks, Hut 8 Mining Corp (TSX: HUT) and HIVE Blockchain Technologies, as well positioned to weather the current bitcoin price/hash rate environment given scaled operations along with the financial flexibility to leverage growth opportunities as newer generation mining equipment and subscale peers become increasingly attractive,” the brokers wrote in a report.

Stifel said its crypto mining coverage is down an average of 81% year-to-date, compared to Bitcoin, which is down about 55% year-to-date.

The broker has updated its hashrate forecast to 285 EH/s for the current year 2022 and 309 EH/s for the current year 2023, up from 240 EH/s and 260 EH/s respectively. This effectively lowers revenue growth and margin forecasts across coverage on a net basis, Stifel noted.

A positive aspect is that the price of mining equipment is becoming increasingly attractive.

“Earlier this week, we saw ARBK sell an additional 3,834 new Bitmain S19J Pro machines at around $15 per terrahash, representing the lowest prices we’ve seen this year and highlighting management’s eagerness to raise additional capital,” Stifel wrote.

On the other hand, Stifel noted that the break-even electricity price for some hardware models continues to deteriorate.

“It has been a headwind for operators who do not have access to cheap energy. For context, Bitmain Antminer S19J Pro machines have a break-even electricity price of US$0.10 per miner. kilowatt hour,” according to the brokers.

Ethereum update

Ethereum (ETH), one of the largest cryptocurrencies, saw a meaningful price rally in the last weeks of October and is currently trading at around US$1,600 per coin. token, down 57% year-to-date.

Stifel said it continues to see bullish supply-demand dynamics as more ETH is progressively deposited for staking, implied staking yields exceeding 7%, and a significant reduction in potential selling pressure due to reduced issuance and burning of ETH- tokens.

“We continue to see Tokens.com (OTCQB:SMURF, NEO:COIN.AQN) and Ether Capital (NEO:ETHC) Corp as attractive vehicles to gain exposure to the Ethereum ecosystem, both of which have direct exposure to the token and long -standing investment strategies,” the analysts wrote.

Careful optimization for selected crypto stocks

Stifel rated Hut 8 Mining Corp (TSX: HUT). as a ‘speculative buy’, noting that the company produced 277 bitcoin equivalents in September and has an unencumbered treasury of 8,388 Bitcoin.

“The company’s hashrate grew to 3.07 EH/s, excluding legacy miners, which the company expects to be fully replaced by the end of the year, and continued to receive monthly shipments of new MicroBT miners. HUT aims for an overall operational hash rate of around 3.5 EH/s by the end of the year,” the brokers wrote.

Stifel also rated HIVE Blockchain Technologies as a ‘speculative buy’ as the company produced 396.3 bitcoin equivalents in September and leads peers based on productivity with around 122 Bitcoin generated per average ASIC hashrate during the period. The brokers said HIVE expects additional capacity to come online this month, including an initial shipment of Intel Blockscale ASICs.

Greenidge Generation Holdings is rated ‘Hold’ according to Stifel as the company released interim financial and operating results for the third quarter of 2022, guiding for a top line of about US$29 million, including US$18 million in contributions from cryptocurrency mining. , while a midpoint-adjusted EBITDA loss of around DKK 2 million is expected. USD.

Stifel also noted that Core Scientific could face insolvency. Core Scientific has said it will stop making funding payments due later this year and expects to run out of cash by the end of 2022 at the latest. The company is the largest public miner by hash rate with a capacity of 22.5 EH/s online across own and hosted mining, according to the broker.

In addition, Stifel said that CleanSpark Inc (NASDAQ: CLSK ). is targeting 5.5 EH/s by year-end and bought around 6,500 ASICs from Mawson for US$40 million, while TeraWulf announced US$17 million in new capital.

Contact the author at susie@proactiveinvestors.com

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