The New Friendly World of Crypto Mining (OSTK, ISWH, RIOT, PYPL, SQ, MSTR, COIN, MARA)

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The world just became much friendlier to companies in the cryptocurrency mining game.

No, Bitcoin didn’t rally back to the highs. No, regulators didn’t just rule in favor of a true bitcoin ETF. No, Walmart didn’t just announce it would accept BTC for payment.

There’s a good chance all of those headlines will be coming down the pike before too long. But what did happen may be even more important in terms of directly translating into profitability for crypto miners: China cracked down, halting mining in its own domestic marketplace.

That cuts 54% of the global hashrate out of the equation. For current miners outside of China, think of it as a massive reduction in competition.

By analogy, imagine all crypto miners were actually gold miners (drilling, digging, etc… the whole bit). But they are all mining in the same gold mine – it would have to be a big one, so imagine a gold mine the size of Rhode Island. But imagine that giant gold mine was full of people bustling around with shovels and picks, bumping into each, simultaneously grabbing the same nugget and getting into fights.

Now, imagine you snapped your fingers, and more than half of those gold miners just disappeared into thin air. Imagine how much better it would be for those still working the mine afterwards.

That’s a rough approximation of what just happened in the crypto mining marketplace. According to a recent piece on CNBC.com, “the bitcoin algorithm has adjusted accordingly to make sure miner productivity doesn’t continue to fall off a cliff. That adjustment – which took effect early Saturday morning – also means that way more cash is going to the bitcoin miners who remain online.”

According to btc.com, the bitcoin code made it about 28% less difficult to mine starting on Saturday July 3. That’s the biggest single-day adjustment toward easing the difficulty factor in bitcoin history.

This shift has enormous consequences up and down the chain for players in the bitcoin mix, including Overstock.com Inc (NASDAQ:OSTK), ISW Holdings (OTCMKTS:ISWH), Riot Blockchain Inc (NASDAQ:RIOT), Paypal Holdings Inc (NASDAQ:PYPL), Square Inc (NYSE:SQ), MicroStrategy Incorporated (NASDAQ:MSTR), Coinbase Global Inc (NASDAQ:COIN), and Marathon Digital Holdings Inc (NASDAQ:MARA).

We take a closer look at what’s driving some of the more interesting names in this group below.

Riot Blockchain Inc (NASDAQ:RIOT) is expanding and upgrading its mining operations by securing the most energy efficient miners currently available. The company also holds certain non-controlling investments in blockchain technology companies, including Verady, Coinsquare, and Tess.

Riot is headquartered in Castle Rock, Colorado, and the company’s mining facility operates out of upstate New York, under a co-location hosting agreement with Coinmint.

Riot Blockchain Inc (NASDAQ:RIOT) recently announced its May production and operational updates, including its unaudited Bitcoin production for May 2021 and its latest miner delivery status.

In May 2021, Riot produced 227 BTC, an increase of approximately 220% over its May 2020 production of 71 BTC. Year to date through May 2021, the Company produced a total of 924 BTC, an increase of approximately 101% over its pre-halving BTC production during the same 2020 period of 460 BTC. As of May 31, 2021, Riot held approximately 2,000 BTC, all of which were produced by its mining operations.

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 11% in that timeframe.

Riot Blockchain Inc (NASDAQ:RIOT) generated sales of $23.2M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 338.4% on the top line. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($275.6M against $7.4M).

ISW Holdings (OTCMKTS:ISWH) and Bit5ive – North America’s largest provider of collective management of renewable, clean energy crypto mining services and equipment – partnered through a JV structure about a year ago to design and assemble a new POD5 concept mining solution – a fully self-contained high-PUE mining solution designed for installation and plug-and-play mining capability.

Each pod is powered by 280 mining rigs and is capable of driving roughly $2.9 million in annualized revenues (at current cryptocurrency price levels). ISW Holdings continues to build out its own mining capacity, with plans to bring multiple additional pods online this year. ISWH also just signed an agreement to take control of a large piece of property and over 100 MW of power tailored to hosting crypto mining in Georgia.

ISW Holdings (OTCMKTS:ISWH) just announced this morning that a third-party auditor has completed and signed off on a full audit of the Company’s 2020 annual financial records. The Company had its 2018 and 2019 financial records fully audited as well.

“We are proud to present a clean bill of health in terms of our financial data and compliance, and we look forward to continued transparency in delivering shareholder value ahead,” commented ISW Holdings President and Chairman, Alonzo Pierce.

According to its release, the completion of this latest audit provides for the Company’s filing of Form 10 to become a fully-reporting entity with the SEC. These steps will help ISWH uplist its shares with the goal being an eventual move onto a major listed exchange, contingent upon the Company meeting its revenue growth projections over coming quarters.

Pierce added, “We are hitting our stride at just the right time. According to recent analysis, China’s move to crack down on cryptocurrency mining nets out to a better world for ISW Holdings: the algorithm has adjusted to 54% of the global hash dropping out of the picture, which makes it 28% easier and more profitable for our own mining operations. With the signing of our new Georgia crypto mining land lease agreement, we are now also positioned to benefit on the hosting side from miners seeking a new home after fleeing China.”

ISW Holdings (OTCMKTS:ISWH) has been acting well over recent days, up something like 10% in that time. The company has also reduced outstanding shares by nearly 25% and eliminated over $3.4 million (or 94%) of outstanding convertible debt in recent months. ISWH appears well positioned to benefit from the fallout of China’s crackdown.

Paypal Holdings Inc (NASDAQ:PYPL) has been one of the first and best when it comes to making the move toward a cryptocurrency-friendly corporate world. Paypal’s announcement of its acceptance of Bitcoin last year was a fundamental game-changer that helped to drive BTC’s massive breakout run.

The company engages in the development of technology platform for digital payments. Its solutions include PayPal, PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products. The firm manages a two-sided proprietary global technology platform that links customers, which consist of both merchants and consumers, to facilitate the processing of payment transactions. It allows its customers to use their account for both purchase and paying for goods, as well as to transfer and withdraw funds.

Paypal Holdings Inc (NASDAQ:PYPL) recently announced the US launch of PayPal Zettle, a digital point-of-sale solution that enables small businesses to seamlessly sell across in-person and online channels. The launch comes at a time when there has been a historic shift in consumer behavior towards digital and omnichannel commerce, and businesses need to adapt to meet their customers wherever they are.

“Consumers want seamless and integrated digital experiences no matter where they shop. As a result, small businesses need access to omnichannel payment and commerce tools to help them effectively compete and meet their customers wherever they are – in-person, online and in-between,” said Jim Magats, SVP, Omni Payments, PayPal. “We believe in the power of small businesses, and we will leverage PayPal Zettle to better serve in-person businesses and enable them to go digital seamlessly.”

Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week.

Paypal Holdings Inc (NASDAQ:PYPL) generated sales of $6.1B, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -1% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($13.1B against $41.3B, respectively).



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