The best way to profit from cryptocurrency is to invest directly - and with nine of the top 10 tokens down for the past seven-day period, this is the perfect time to begin building or adding to your holdings of "foundational" cryptos.
To maximize those profits, though, investors need to look at crypto stocks, as well. These stocks and a crypto portfolio get you the broadest possible exposure to the sector. Here again, stocks like Riot Blockchain Inc. (NASDAQ: RIOT) and Coinbase Global Inc. (NASDAQ: COIN) are offering attractive entry points thanks to the volatility and moves to the downside we've seen lately.
Investors seeking exposure to crypto via the stock market are about to get even more choices in 2022, thanks to a crop of miners I'm expecting to come to market this year.
Here are the four I think should be on your radar screens right now...
Crypto Miners Dominate This Class of Stocks
The number of crypto mining stocks trading on United States markets already ranges into the high teens. And if you're wondering why you haven't heard about all those IPOs, well, that's because most of those companies did not have public offerings.
One common path to the market has been a reverse merger, where an existing publicly traded company switches to crypto mining and changes its name. That's what Riot Blockchain did in 2018. Others have taken the popular special purpose acquisition company (SPAC) route, like Cipher Mining Inc. (NASDAQ: CIFR) did last year.
We've also seen more crypto companies do IPOs, including the splashy Coinbase Global direct listing IPO last April.
The 2022 batch of new crypto stocks will be stacked with miners, most of them SPACs. With that in mind, here's a preview of the top five crypto mining stocks expected to land in 2022 - including which are worth getting excited about...
Core Scientific (Type: SPAC)
Just a few weeks into the year and the first new crypto stock of 2022 is Bitcoin (BTC) miner Core Scientific Inc. (NASDAQ: CORZ), which started trading this past Thursday after taking the SPAC (special-purpose acquisition company) route to the markets. The venerable BlackRock Inc. (NASDAQ: BLK) was the anchor investor.
What sets Core Scientific apart: Core Scientific not only mines its own Bitcoin but it also provides services for third-party miners, including infrastructure and technology. It's one of the biggest Bitcoin miners in North America, with 6.6 exahashes of mining power - double that of most of its rivals. Its customers have a combined 6.9 exahashes. The company has more than 70 patents associated with digital asset mining. It operates in Georgia, Kentucky, North Carolina, and North Dakota, with a site planned for Texas. Through using green power and buying credits, it seeks to keep its operations carbon-neutral.
Financials: Core Scientific has yet to report its 2021 results, but it estimated revenue at $493 million, with estimated EBITDA (earnings before interest, taxes, depreciation, and amortization) at $203 million. As of last September, Core Scientific was not profitable, recording a net loss of $75 million. For 2022, the company expects revenue of $1.14 billion and EBITDA of $572 million.
Rhodium Enterprises (Type: IPO)
The first crypto initial public offering (IPO) of 2022 was to be Bitcoin miner Rhodium Enterprises Inc. (NASDAQ: RHDM). It was set to go public Thursday but was postponed at the last minute due to concerns over market conditions. It's now unclear when Rhodium will start trading.
But since Rhodium was on the very brink of its IPO, we know some important details about the stock IPO. The plan was to sell 7.7 million shares priced somewhere between $12 and $14 to raise as much as $108 million. The proceeds were to be used to pay down existing debt incurred from building up its current mining operation.
What sets Rhodium apart: Rhodium has a proprietary liquid-cooling technology, which the company claims allows it to "mine more Bitcoin with fewer miners." The company also says the technology will extend the life of the mining hardware by 30% to 50%. Rhodium mines in crypto-friendly Texas, where it plans to tap that state's "independent power market and abundance of low-cost renewable energy resources." As of December 31, 2021, it was running 2.7 exahashes of mining power.
Financials: Rhodium showed a profit last year. For the nine months ended Sept. 30, 2021, it reported $46.1 million in net income ($0.10 per share) on $82.1 million in revenue. The company had $103.8 million in cash on hand.
PrimeBlock Ventures (Type: SPAC)
PrimeBlock plans to merge with a blank-check company called 10X Venture Capital Acquisition Corp. (NASDAQ: VCVC). Shares are expected to trade on the Nasdaq exchange. It's a relatively new company, so information on it is sparse.
What sets PrimeBlock apart: PrimeBlock provides end-to-end mining infrastructure and hosting services to third parties. It aims to be one of the most energy-efficient mining operations in the industry and operates four sites in North America. It currently has 1 exahash of mining power.
Financials: PrimeBlock expects to generate annualized revenue of $100 million.
Griid (Type: SPAC)
Griid has a SPAC deal with a company called Adit EdTech Acquisition Corp (NYSE: ADEX). It is expected to trade on the New York Stock Exchange (NYSE) under the ticker GRDI.
What sets Griid apart: Griid has made a deal with Intel Corp. (NASDAQ: INTC) to be one of the first customers of the chipmaker's new Bonanza Mine ASIC miners. Most Bitcoin miners use ASICs made by China-based Bitmain. If Intel's miners are indeed cheaper and more efficient than Bitmain's, it could be an advantage for Griid. The company also says it strives to lead the industry in its use of carbon-free energy. The Ohio-based company has little mining power now (0.187 exahashes), but it expects to boost that by more than 2,520% to 4.9 exahashes by the end of 2022.
Financials: Griid only recently started operations, so I can only give you company projections. Griid expects revenue of $502.9 million in 2022 and EBITDA of $406.5 million.
How to Find the Right Miner to Own
It's usually wise to hold off on buying any newly listed stock. The first week or so of trading can be very volatile. You also want to see if the pricing holds up - Wall Street takes a dim view of any new stock that falls below its offer price.
Also bear in mind that the price of Bitcoin will exert a lot of influence over the prices of crypto mining stocks. Even a well-run mining company with an excellent strategy will fluctuate alongside Bitcoin. That said, crypto miners are a great way to maximize your crypto exposure. But there's a huge array of choices, so I have some suggestions to help you ferret out the best prospects.
First, look at the size of the mining operation. Companies with more hash power will mine more crypto and make more profit. The miners know this all too well - they're all planning to add a lot more hash power this year.
Also, look for any differentiating factor that might give the company an edge. Does the company have access to cheaper electricity than competitors? Lower costs mean higher profit margins.
Is it using all or mostly green energy? If so, it will help insulate the company from the pushback the mining industry is getting for contributing to climate change.
Does the company have some kind of proprietary technology or system that makes it more efficient than rivals?
You'll also want to look at some fundamental data. Remember, these are stocks, not cryptocurrencies. Look at the balance sheet. Miners with too much debt and not enough cash will fall behind in the "arms race" of buying newer, faster, more efficient mining hardware.
Another extremely useful metric for sizing up miners is the price-to-sales (P/S) ratio. Companies with a lower P/S ratio suggest they could be a better bargain.
Of the companies on this list, I'd keep an eye on Core Scientific. It already has more mining hash power than just about all of its competitors and is rapidly adding more - and it's doing so while executing on a carbon-neutral strategy.
Plus, it had the misfortune of coming to market just prior to a crypto market plunge, so it's suddenly oversold!