Home Blockchain Why Hive Blockchain (NASDAQ:HIVE) Stock Presents an Attractive Opportunity

Why Hive Blockchain (NASDAQ:HIVE) Stock Presents an Attractive Opportunity

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Why Hive Blockchain (NASDAQ:HIVE) Stock Presents an Attractive Opportunity

Despite bitcoins (BTC-USD) and with altcoins being in a bear market, there are some interesting investment opportunities in the space as blockchain adoption increases. During the last bull market, bitcoin miners surged as these companies predicted big increases in hashing capacity. The correction that followed was just as sharp. Of the upcoming players, I’m bullish on Hive Blockchain (HIVE). HIVE’s current price looks attractive, given 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, restrictive monetary policies led to a drop in speculative activity in all asset classes. The cryptocurrency space has therefore undergone a deep correction.

Bitcoin, however, recovered from the lows and is currently trading above $21,000. It seems likely that the cryptocurrency will gradually rise.

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

Specific to cryptocurrencies, Blockware-Intelligence estimates that global bitcoin adoption will reach 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 mopped up bitcoin at lower levels. This is an indicator of another potential rally over the next few 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

As 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 a surge in its bitcoin mining capacity. In the fourth quarter of fiscal 2022, the company mined 789 bitcoins compared to 189 in the fourth quarter of 2021. Additionally, in the first quarter of 2023, Hive mined the equivalent of 1,338 bitcoins. The growth momentum has therefore been maintained even with the sharp correction in cryptocurrencies.

In Q1 2023, the company reported $71.4 million in digital assets. Importantly, this includes Bitcoin and Ethereum assets. With the Ethereum merger around the corner, the outlook is optimistic. This is good news for Hive.

Additionally, if Bitcoin and Ethereum eventually rise, the value of digital assets on the balance sheet will increase. Just to put things into perspective, the value of digital assets in Q4 2022 was $171 million.

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

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

Additionally, in April 2021, the company acquired a 5% stake in DeFi Technologies (DEFTF). With decentralized finance still in an early growth stage, strategic investing is likely to generate 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) sector.

What are the risks of Hive Blockchain?

Hive Blockchain is still at an early stage of growth. In March 2022, the company announced a $100 million offering to the market. Further dilution of stocks to accelerate growth is a potential risk for existing investors. However, if revenue growth remains robust, the dilution factor will be offset.

Yet, uncertainties exist on the global macroeconomic front. If investors remain underweight risky asset classes, cryptocurrencies will take longer than expected to move higher. Even if the number of bitcoins mined increases, Hive will be impacted due to margin compression.

The Bitcoin halving is also scheduled for May 2024. This will involve a halving of bitcoin rewards. Even with a higher hash capacity, the number of bitcoins mined will decrease. However, the halving will also reduce supply and will likely have a positive impact on price.

What is the forecast for HIVE stock?

As far as Wall Street is concerned, Hive Blockchain has a moderate buy consensus rating based on two buy ratings given in the past three months. The Hive stock average price prediction of $6.25 implies an upside potential of 26.8%.

Conclusion: HIVE Stock May Be Worth the Risks

Even with the risk factors, Hive stock looks attractive at current levels. Risk-taking investors may consider some exposure to the stock. The expansion of the company’s mining capacity has been robust and I see no financial constraints. If bitcoin tends to rise, as it has in the past, the value of the digital assets on its balance sheet will increase.

This seems quite likely, as the global economy is likely to be supported over the long term by expansionary monetary policies. Assets with limited supply should increase in value relative to fiat currency.

Additionally, given the company’s strategic investments, it is likely that Hive Blockchain will be more diverse in the coming years. Overall, Hive stock appears positioned to create long-term value.

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