Bit Digital Stock: Future Looks Bright as Bitcoin Rebounds (NASDAQ:BTBT)

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Most of the time, Digital Bit (NASDAQ:BTBT) performed similarly to its Bitcoin mining peers (BTC-USD), moving in tandem with the Bitcoin price after it temporarily experienced a Bitcoin price decoupling, when in May 2021 China essentially shut down mining in the parents.

As you can see in the chart below, news of China’s leadership crackdown caused the stock to plummet much more than its competitors after lining up with them since the beginning of the year.

BTBT chart showing performance against peers.

trade view

In this article, we’ll look at its recovery potential again, as well as why I believe the recently reported drop in quarterly earned Bitcoins shouldn’t have much impact on its share price going forward.

While I don’t consider BTBT to be my top pick among Bitcoin miners, I do take positions in it because of the price range it moves in, and it occasionally moves in the opposite direction of its peers, giving you an option to enter a price. decent. entry point when your peers are consolidating.

Chinese crackdown on Bitcoin mining

In June 2021 it became official: China decided to ban Bitcoin mining in China, making it nearly impossible for large miners to successfully operate in the country, resulting in these miners migrating to friendly jurisdictions. BTBT was among them (the company actually started migrating to other countries in October 2020).

In the time leading up to and immediately after the news was confirmed, BTBT’s share price struggled, even as its competitors moved in tandem with the price of Bitcoin; it is one of the few times a miner has unlinked from the Bitcoin price, even if it didn’t last long.

My point here is that it resulted in the company having some negative feelings associated with it for a period of time. It has since recovered to move once again in alignment with the price of Bitcoin and its peers. Even so, it is still being impacted by the time it takes to make the geographic transition.

Bitcoins Earned Quarterly for BTBT

Bit Digital reported on March 16, 2022 that nearly 40% of its existing fleet of miners had already been deployed to North American markets; which included 10,462 Bitcoin miners and 712 Ethereum miners, representing 0.511 Exahash and 0.188 Terahash.

At the end of 2021, the company had 7,710 Bitcoin miners in North America, to give you an idea of ​​the progress it is making. At that time, it had 27,744 Bitcoin miners and 731 Ethereum miners.

All things considered, it wasn’t too bad to have gained 240.57 Bitcoins during the quarter, slightly down from the 248.36 Bitcoins gained in the previous quarter, which was reported in November.

As of December 31, the company held 808.2 BTC with a market cap of $37.4 million. When all is said and done, this reinforces my thesis of the two main factors that determine the share price of Bitcoin miners.

What determines BTBT’s share price

As mentioned earlier, Bit Digital temporarily parted ways with the Bitcoin price before and after the Chinese crackdown on miners. As the chart above shows, it didn’t take long for the company to move back in tandem with the price of Bitcoin and its peers.

In other words, among Bitcoin mining companies, based on temporary outages or anomalies, there could be a short-term break in Bitcoin price movement, but with the many Bitcoin miners I studied, they all re-correlated with Bitcoin price movement.

The second thing to watch out for with Bitcoin miners is their balance sheet. In the case of BTBT, it had cash and cash equivalents of US$26.5 million at the end of September 30, 2021, with total liquidity of approximately US$61.5 million.

One thing to take into account with Bit Digital that is less robust with the company is its smaller volume than its major peers.

According to Seeking Alpha, the average volume is 3,700,468, while that of HIVE Blockchain (HIVE) is 6,405.005 million; Marathon Digital Holdings, Inc. (MARA) is 11,951,540; and the volume of Bitfarms (BITF) is 5,158,167.

This shouldn’t be a problem if investors were holding a relatively small position in the company, but even a few hundred shares would sometimes have to be sold in smaller quantities; which usually happens in the middle of the trading day. Assuming the stocks are selling hard, this isn’t really a big deal unless you’re trying to sell a significant amount of stock at once.

Conclusion

Bit Digital once again has its share price moving in correlation with the Bitcoin price. This suggests investors are no longer discounting the stock price on the temporary concerns they had when China cracked down on Bitcoin mining.

Even when it announced that it is still in the midst of transitioning, it had no impact on the company’s stock price, meaning investors are now comfortable with the progress it is making, no longer considering it risks underperformance. from now on; management has done a good job in difficult conditions.

The good news is that we can get back to the simplicity of trading a Bitcoin miner like BTBT, primarily by following Bitcoin’s price movement and the amount of cash and cash equivalents it holds.

Of course, that doesn’t mean it won’t continue to go through periods of volatility, because it will. What has changed is that volatility is now linked to Bitcoin price performance rather than situations beyond the company’s control.

When the Bitcoin price resumes a sustainable rise, Bit Digital should rise with it. Outside of less liquidity than its competitors, it should perform very similarly to their performance.

As I mentioned earlier, Bit Digital is not the Bitcoin miner I go to first, or even second, when looking for a position in the industry. This is not necessarily for any specific reason, except that there are other more liquid miners that move in the same way as BTBT, so it doesn’t make much sense to copy my positions there, other than if it temporarily moves in the opposite direction of its peers.

That said, I like Bitcoin miners trading at different prices, and having an option on the price range Bit Digital trades in is attractive when I don’t want to deploy as much capital into the space by taking positions at higher miners prices.

The end result is that Bit Digital moves similarly to its peers, and aside from the reasons I mentioned above, it doesn’t offer much in the way of differentiation.

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