Why Hive Blockchain (NASDAQ:HIVE) stock presents an attractive opportunity

Despite bitcoin (BTC-USD) and altcoins that are in a bear market, there are attractive investment opportunities in the area as blockchain adoption increases. In the recent bull market, bitcoin miners surged, with these companies planning large increases in hashing capacity. The subsequent correction has been just as sharp. Among the upcoming players, I am bullish on Hive Blockchain (HIV). The current price tag on HIVE looks attractive, considering the company’s growth prospects.

The worst seems to be over for Bitcoin

It is important to note that bitcoin is still in a price discovery phase. This period will be associated with high volatility. At the same time, tightening monetary policy led to lower speculative activity across asset classes. The cryptocurrency space therefore witnessed a deep correction.

However, Bitcoin has recovered from the lows and is currently trading above $21,000. It seems likely that the cryptocurrency will gradually trend higher.

The likelihood of a recession in the US has increased with aggressive interest rate hikes. In a recessionary scenario, inflation is likely to cool, which is good news for asset classes.

Especially for cryptocurrencies, Blockware Intelligence estimates that global bitcoin adoption will touch 10% by 2030. With the crypto having limited supply, the price is likely to remain in a long-term uptrend.

Another important point to note is that institutional investors have been drying up bitcoin at lower levels. This is an indicator of another potential rally in the coming quarters.

Overall, the best time to buy an asset is when there is blood in the streets. The same goes for bitcoin and crypto stocks.

Hive Blockchain: Delivering Strong Financial Performance

While markets focus on short-term headwinds, Hive Blockchain has delivered strong numbers. In its most recent fiscal year, the company reported year-over-year revenue growth of 212% to $211.2 million.

This growth was driven by strong upside in bitcoin mining capacity. In Fiscal Q4 2022, the company mined 789 bitcoins compared to 189 in Q4 2021. Furthermore, in Q1 2023, Hive mined 1,338 bitcoin equivalents. The growth momentum has therefore maintained itself with the strong correction in cryptocurrencies.

In Q1 2023, the company reported $71.4 million in digital assets. It is important to note that this includes bitcoin and Ethereum assets. With the Ethereum merger around the corner, the outlook is positive. This is good news for Hive.

Furthermore, if bitcoin and Ethereum eventually trend higher, the value of digital assets on the balance sheet will swell. Just to put things into perspective, the value of digital assets as of Q4 2022 was $171 million.

Another important point to note is that Hive reported a total hashing capacity of 3.3EH/s in March 2022. Mining capacity is expected to increase to 4.6EH/s by December 2022. Therefore, the number of bitcoin and Ethereum mined should continue to increase quarterly -on a quarterly basis.

One factor that sets Hive apart from its peers is diversification. Marathon Digital (MARA) and Riot Blockchain (RIOT) are pure bitcoin miners, while Hive also mines Ethereum.

In addition, in April 2021 the company acquired a 5% stake in DeFi Technologies (DEFTF). With decentralized finance still at an early stage of growth, the strategic investment is likely to provide long-term value. Similarly, in October 2021 the company announced a strategic investment in Network Entertainment (TSXV: NTE). This gives Hive exposure to the emerging non-fungible token (NFT) business.

What are the risks of Hive Blockchain?

Hive Blockchain is still in an early stage of growth. In March 2022, the company announced a $100 million IPO. Further equity dilution to accelerate growth is a potential risk for existing investors. However, if top-line growth remains robust, the dilution factor will balance out.

Nevertheless, uncertainty exists on the global macroeconomic front. If investors remain underweight on risky asset classes, cryptocurrencies will take longer than expected to trend higher. Even if the number of bitcoin mined increases, Hive will be affected due to margin compression.

Bitcoin’s halving is also due in May 2024. This will mean a halving of bitcoin rewards. Even with higher hashing capacity, the number of bitcoin mined will decrease. However, halving will also cut supply and will likely have a positive impact on price.

What is the forecast for the HIVE share?

On Wall Street, Hive Blockchain has a Moderate Buy consensus rating based on two Buy ratings assigned in the past three months. The average Hive stock price forecast of $6.25 implies 26.8% upside potential.

Conclusion: HIVE shares may be worth the risk

Even with the risk factors, the Hive share looks attractive at today’s level. Risk-averse investors may consider a certain exposure to the share. The company’s expansion of mining capacity has been robust, and I see no financial constraints. If bitcoin trends higher, as it has done in the past, the value of digital assets on the balance sheet will increase.

This seems entirely likely as the global economy is likely to be supported in the long term through expansionary monetary policy. Assets with limited access should increase in value relative to fiat money.

Considering the company’s strategic investments, it is also likely that Hive Blockchain will become more diversified over the next few years. Overall, the Hive share appears to create long-term value.

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