Roughly every four years, Bitcoin (BTC-USD) mining companies eagerly anticipate the halving event. According to the latest estimates, the nearest one may take place in April 2024 and will put pressure on the margins of mining companies as the miners’ rewards will be cut twice. This can also lead to a drop in the value of the main cryptocurrency, which in turn can negatively affect crypto stocks to sell before bitcoin halving.
Hut 8 (HUT-USD)
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The magnificent landscapes of Canada are home to Hut 8 Mining Corp‘s (NASDAQ:HUT) facilities. The climate makes it possible to keep cooling costs to a minimum. Hydroelectric and nuclear power plants provide power and make mining more cost-effective and more environmentally friendly.
The company focuses on mining digital assets with a focus on bitcoin. Data center services and support for other miners are also part of Hut 8’s profit margins, but the ready-made line of business is still related to the mining of the first cryptocurrency. Accordingly, the company’s well-being directly depends on the market situation and the exchange rate of the coin.
Since the beginning of its business, the company has gained experience in unfavorable conditions. Halving 2020 and the subsequent decline in cryptocurrency prices left a mark on its history. Over the past year, the company’s shares have risen by 13%, but are still falling relative to their 52-week highs. Increased trading activity indicates that there is demand from investors. They paid attention to the company’s recent acquisitions of power plants but may have missed the impact of bitcoin halving.
As of now, the situation may look rosy. The high market capitalization of $1.20 billion, construction of a new digital asset mining site in Texas and an optimistic two-week share price chart reassure holders of this asset.
Nevertheless, HUT is one of the crypto stocks to sell before bitcoin halving due to its weaker preparation compared to the previous halving event. After the reward for mining new blocks was halved from 12.5 BTC to 6.25 BTC in May 2020, only the company’s operational actions offset the decline in profitability. In 2024, Hut 8 has not diversified its revenue enough to pass April with a stable share price.
Also, it is worth keeping in mind that the company trades in a competitive environment and cannot guarantee that the bitcoin correction will not coincide with the time of the coins’ sale.
Riot Platforms (RIOT)
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Blockchain technology is the center of the Riot Platforms (NASDAQ:RIOT) universe. Until 2023, the company was called Riot Blockchain, and the rebranding affected both the focus on blockchain platforms and the brand positioning. What remained unchanged was the presence of bitcoin mining in the company’s revenue structure. The project’s mining capacity is growing every year, as Riot has chosen to increase its share in the bitcoin network’s hash rate. For this purpose, the company constantly optimizes processes and purchases new equipment.
From 2017 to the time of the previous halving, RIOT fell by more than 97% to $1.14. Problems with the Securities and Exchange Commission (SEC) reinforced the impression of this company as a significant debtor. For example, the net loss in 2018 amounted to $60.2 million.
The company is still facing financial challenges. In 2024, it is struggling with rising costs and strategic uncertainty. The cost of bitcoin mining is rising, and in the coming weeks, the reward for this work will be halved. Strategically, the company is moving towards a hashrate of 100 exahash operations per second (EH/s). The downside of this plan is the potential doubling of equipment depreciation costs after the halving.
In less than 2 years, Riot’s business cost per bitcoin mined has increased 2.5 times. In Q4 2021, this figure was $44,400, and in Q3 2023, it was $110,000. The continuation of the trend could lead RIOT to a stalemate, which is why it is among the crypto stocks to sell before bitcoin halving.
Canaan Creative Inc. (CAN)
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The words “mining” and “artificial intelligence” largely describe the clients of Canaan Inc. (NASDAQ:CAN). The company develops high-performance microchips to meet the needs of these areas and (as its mission statement claims) seeks to apply its technology to social enrichment.
After falling below $2 in 2020, the company’s shares soared to more than $34. This rise in 2021 was not repeated even during the initial AI hype. CAN has been slowly descending to the current level, which is close to $1.5.
4 years ago, experts also warned that CAN was one of the crypto stocks to sell before bitcoin halving. 2020 brought difficulties for Canaan in the form of logistical disruptions around the Chinese New Year, a 48% decrease in cash reserves, and a deterioration in overall investment attractiveness. Net losses in early 2020 amounted to $5.6 million and made investors think about other companies to invest in.
The spring of 2024 is greeting the company with a tense geopolitical situation. Canaan’s location in China does not play into its hands due to changes in supply chains and an increasing number of bans by Western countries. While the coronavirus is no longer as damaging as it was in 2020, competition from strong players and the impending bitcoin halving may hold unpleasant surprises for CAN holders.
On the date of publication, Julia Magas did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
