Global Crypto Concept Stocks Analysis: The Liquidity Oasis Beyond the Crypto Market

Original Authors: JoyChen, EvanLu, Waterdrip Capital

As the global financial regulatory environment becomes increasingly clear, the cryptocurrency market is transitioning from its original "niche circle" to the mainstream financial system. Since the U.S. election, President Trump's election has had a positive impact on the cryptocurrency industry, promising to adopt a more friendly regulatory policy, including establishing a national Bitcoin reserve and encouraging the expansion of Bitcoin mining activities in the U.S. These commitments have boosted market confidence. In the following days, a widespread transmission began in the capital market, and against this backdrop, various blockchain concept stocks experienced a general rise.

Currently, more and more public companies have recognized the enormous potential of blockchain technology and actively incorporated it into their company's strategic layout. Many companies with blockchain concept stocks have shown strong development momentum, gaining significant attention and investment in the market. These companies have driven digital transformation and value creation in their businesses by introducing blockchain technology, gradually becoming key players in the industry. We have closely monitored many stocks in this field and seen their increasingly impressive performance in the capital market, with the potential for greater development opportunities in the future under the influence of blockchain:

In recent years, especially with the launch of cryptocurrency-related ETFs in the U.S. (such as Bitcoin spot ETF), there has been a regulatory dividend, marking that cryptocurrency is no longer limited to a closed digital currency market but is deeply integrated with the traditional capital market. As a pioneer in this regard, Grayscale's Bitcoin Trust (GBTC) has become a bridge for traditional investors to enter the crypto market. Data shows that as of November 20, BlackRock's Bitcoin spot ETF (IBIT) had nearly $45 billion in assets under management, with almost continuous net inflows since the beginning of the year. The Grayscale Bitcoin spot ETF (GBTC) has around $20.3 billion in assets under management, demonstrating investors' interest and confidence in this emerging asset class.

The total market value of the current cryptocurrency market is about $3.2 trillion, which we can classify into the following three main categories:

1. Bitcoin (BTC)

Bitcoin, as the core asset of the entire crypto market, currently has a market value of about $1.9 trillion, accounting for over 50% of the total cryptocurrency market value. It is not only a value storage tool recognized by both traditional finance and the native coin community, but also the preferred choice of institutional investors for its anti-inflationary nature and limited supply, earning it the title of "digital gold." Bitcoin plays a key hub role in the crypto market, stabilizing the market while also providing an interconnected bridge between traditional assets and native on-chain assets.

2. On-Chain Native Assets

This category includes public blockchain tokens (such as Ethereum's ETH), decentralized finance (DeFi)-related tokens, and utility tokens within on-chain applications, among others. This field encompasses a wide range of assets, characterized by high volatility, with market performance driven by technological updates and user demand. Currently valued at approximately $1.4 trillion, it significantly lags behind the market's anticipated high growth.

3. Integration of Traditional Assets with Cryptographic Technology

This sector covers emerging projects such as on-chain tokenization of real-world assets (RWA) and blockchain-based asset securitization. Presently valued at only a few hundred billion dollars, this field is rapidly evolving with the widespread adoption of blockchain technology and deep integration with traditional finance. Tokenizing traditional assets to enhance liquidity is a key driver of future growth in the crypto market. We are highly optimistic about this sector, believing it will propel traditional finance towards a more efficient and transparent digital transformation, unlocking significant market potential.

Why Are We Bullish on the Growth Potential of Traditional Assets?

In the past six months, Bitcoin's asset characteristics have undergone a new evolution, and the dominant force in the capital markets has completed the transition from old powers to new money flows.

By 2024, cryptocurrency's position in the traditional financial sector will be further solidified. Financial giants, including BlackRock and Grayscale, have introduced Bitcoin and Ethereum exchange-traded products, providing more convenient digital asset investment channels for institutional and retail investors, further confirming the connection with traditional securities.

Simultaneously, the trend of tokenizing real-world assets (RWA) is rapidly advancing, enhancing market liquidity and coverage. For instance, in 2024, Germany's state-owned development bank KfW issued two digital bonds totaling 150 million euros using blockchain technology for settlement. French computer equipment manufacturer Metavisio issued corporate bonds, leveraging tokenization to fund its new manufacturing facility in India, showcasing how traditional financial institutions are optimizing operational efficiency through blockchain technology. Many financial institutions have already integrated cryptographic technology into their business models.

Today, a capital circulation model centered around Bitcoin, with ETFs and the stock market as primary inflow channels, and with publicly traded US companies like MSTR as hosting platforms, continues to absorb USD liquidity extensively.

The integration of traditional finance and blockchain will unlock more investment opportunities than nurturing native on-chain assets. Behind this trend lies the market's emphasis on stability and real-world use cases. The traditional financial market possesses a robust infrastructure and mature market mechanisms. When combined with blockchain technology, it will unleash even greater potential. In this regard, Waterdrip Capital, especially its Pacific Waterdrop Digital Asset Fund, will also focus on the innovative integration of the traditional financial market and the crypto industry in the future to seek investment opportunities in the convergence field.

This research report will briefly analyze the growth model of blockchain concept stocks, especially their integration with on-chain assets, to discover more innovative investment opportunities. For example, MSTR's issuance model demonstrates a typical path of exchanging USD assets for on-chain assets through convertible bonds and stock issuance. Recently, MSTR's stock price soared rapidly along with the price of Bitcoin. The yield of its 2027 convertible bonds hit a three-year high, outperforming traditional tech stocks by far.

Through these perspectives, it can be observed that the future development of the crypto market is not just the increment of digital currencies themselves but also the enormous potential of integrating with traditional finance. From regulatory advantages to changes in market structure, blockchain concept stocks are at a key juncture of this major trend, attracting global investors' attention.

We will roughly classify current blockchain concept stocks into the following categories:

1. Asset-Driven Concept:

For blockchain stocks focusing on asset allocation concepts, the company's strategy is to hold Bitcoin as its primary reserve asset. This strategy was first implemented by MicroStrategy in 2020 and quickly drew market attention. This year, other companies such as the Japanese investment firm MetaPlanet and the Hong Kong-listed company Boya Interactive have also joined in, continuously increasing their Bitcoin holdings. MetaPlanet announced the introduction of the key performance indicator "Bitcoin Yield," formulated by MicroStrategy. Its Q3 BTC Yield was 41.7%, rising to 116.4% in Q4 (as of October 25).

Top 30 public companies globally holding Bitcoin as a reserve asset

*Data Source: coingecko

Specifically, companies like MicroStrategy have adopted a strategy of introducing the "Bitcoin Yield" as a key performance metric to provide investors with a new perspective to evaluate the company's value and investment decisions. This metric is based on the diluted share count and calculates the amount of Bitcoin held per share, disregarding Bitcoin price fluctuations. It aims to help investors better understand the company's behavior of purchasing Bitcoin through the issuance of additional common stock or convertible instruments, focusing on balancing the growth of Bitcoin holdings with share dilution. As of now, MicroStrategy's Bitcoin investment yield has reached 41.8%, indicating that the company has successfully increased its holdings while avoiding excessive dilution of shareholder interests.

However, despite MicroStrategy's significant achievements in Bitcoin investment, the company's debt structure has raised market concerns. Reportedly, MicroStrategy's current outstanding debt totals $4.25 billion. During this period, the company has raised funds through multiple rounds of convertible bond offerings, some of which carry interest payments. Market analysts are concerned that if the price of Bitcoin were to sharply decline, MicroStrategy may need to sell some of its Bitcoin to repay the debt. However, some believe that due to MicroStrategy's reliance on its stable traditional software business and the low-interest-rate environment, its operating cash flow is sufficient to cover debt interest, so even in the event of a steep Bitcoin price drop, the company is unlikely to be forced to sell its Bitcoin assets. Additionally, MicroStrategy's stock market capitalization currently stands at $43 billion, with debt representing a small proportion of its capital structure, further reducing the liquidity risk.

Despite many investors being optimistic about the company's steadfast Bitcoin investment strategy, believing it will bring substantial returns to shareholders, some investors are concerned about its high leverage and potential market risks. Given the extreme volatility of the cryptocurrency market, any adverse market changes could significantly impact the asset value of such companies, and their stock prices carry a significant premium over their net asset value. Whether this situation can be sustained is a focus of the market's attention. A price correction could affect the company's financing capabilities, thereby impacting its future Bitcoin purchase plans.

1. MicroStrategy (MSTR)

Business Intelligence Software Company

MicroStrategy was founded in 1989, initially focusing on business intelligence and enterprise solutions. However, starting in 2020, the company transformed into the world's first publicly traded company to adopt Bitcoin (BTC) as a reserve asset, fundamentally changing its business model and market position. Founder Michael Saylor played a key role in driving this transformation, shifting from an early Bitcoin skeptic to a staunch supporter of cryptocurrency.

Since 2020, MicroStrategy has been continuously purchasing Bitcoin through various means such as using its own funds and debt financing. As of now, the company holds approximately 279,420 bitcoins with a current market value of nearly $23 billion, representing about 1% of the total Bitcoin supply. The most recent purchase occurred between October 31 and November 10, 2023, acquiring 27,200 bitcoins at an average price of $74,463 per bitcoin. The average holding cost of these bitcoins is $39,266, while the current Bitcoin price has reached around $90,000, resulting in MicroStrategy's unrealized gain on investment nearly doubling.

Despite facing an unrealized loss of about $1 billion on its Bitcoin investment during the bear market in 2022, MicroStrategy has never sold any Bitcoin but instead chose to continue accumulating. The strong upward trend of Bitcoin since 2023 has significantly boosted MicroStrategy's stock price, leading to a year-to-date return of 26.4% and a cumulative return of over 100%.

MicroStrategy's current operating model can be seen as a "BTC-denominated circular leverage model" by financing Bitcoin purchases through issuing bonds. While this model has brought high returns, it also carries certain risks, especially during sharp Bitcoin price fluctuations. Analysis indicates that the Bitcoin price would need to drop below $15,000 for the company to face liquidation risk, a highly unlikely scenario given the current Bitcoin price nearing $90,000. Furthermore, the company has a low leverage ratio, and there is strong demand in the bond market, further enhancing MicroStrategy's financial stability.

For investors, MicroStrategy can be viewed as a leveraged investment tool in the Bitcoin market. With expectations of a steady rise in Bitcoin price, the company's stock has significant potential. However, investors should be cautious of the mid-to-long-term risks associated with debt expansion. In the next 1 to 2 years, MicroStrategy's investment value remains noteworthy, especially for investors bullish on the outlook of the Bitcoin market, as it represents a high-risk, high-return opportunity.

2. Semler Scientific (SMLR)

Semler Scientific is a company focused on medical technology, and one of its innovative strategies is to use Bitcoin as its primary reserve asset. In November 2024, the company disclosed its latest purchase of 47 bitcoins, increasing its total holdings to 1,058 bitcoins, with a total investment of around $71 million. Some of these acquisition funds are sourced from operational cash flow, signaling that Semler is aiming to strengthen its asset structure through Bitcoin holdings, positioning itself as a pioneer in asset management innovation.

However, Semler's core business still focuses on its QuantaFlo device, which is mainly used for diagnosing cardiovascular diseases. Nevertheless, Semler's Bitcoin strategy is not just a financial reserve. In the third quarter of 2024, the company realized $1.1 million in unrealized gains from its Bitcoin holdings, providing Semler with financial hedging during economic fluctuations despite a 17% year-on-year revenue decline in the quarter.

Although Semler's current market capitalization is only $345 million, much lower than MicroStrategy, its strategy of adopting Bitcoin as a reserve asset has led investors to consider it as a "mini MicroStrategy."

3. Boya Interactive

Boya Interactive is a Hong Kong-listed company whose main business is games. It is a leading developer and operator in the Chinese chess and card game industry. Starting in the second half of last year, the company began to explore the crypto market with the aim of transforming into a Web3 listed company. The company acquired a large amount of Bitcoin, Ethereum, and other crypto assets, invested in multiple Web3 ecosystem projects, and signed a subscription agreement with Pacific Waterdrip Digital Asset Fund SPC under Waterdrip Capital for strategic cooperation in Web3 game development and the Bitcoin ecosystem. The company has stated, "The purchase and holding of cryptocurrencies is an important measure for the Group to develop and layout its Web3 business and an important part of the Group's asset allocation strategy." As of the latest announcement, Boya Interactive holds 2,641 Bitcoins and 15,445 Ethereums, with total costs of approximately $143 million and $42.578 million, respectively.

It is worth mentioning that due to the recent activity in the cryptocurrency market, both Bitcoin and cryptocurrencies have seen significant gains. Based on the closing prices of cryptocurrencies on the 12th, Boya Interactive has an unrealized gain of nearly $90.22 million on Bitcoin and approximately $7.95 million on Ethereum, totaling nearly $100 million in unrealized gains.

The continuous rise in cryptocurrency prices has sparked high market attention on related concept stocks. Taking the Hong Kong stock market as an example, as of November 12th, Blueport Interactive rose by 41.18%, New Fire Technology Holdings rose by 27.40%, and Euro-Chain Cloud rose by 11.65%, demonstrating strong performance of blockchain-related companies. The Hong Kong blockchain market is still in its early stages of development, but the policy environment is continuously improving. Recently introduced policies supporting blockchain development encourage open innovation, creating a favorable growth environment for companies. Some companies rely on the asset-driven effect of cryptocurrency price fluctuations while actively exploring the practical application of blockchain technology in gaming, finance, the metaverse, and other areas. The further growth of the market will depend on the effectiveness of technology implementation and the improvement of the ecosystem, providing investors with a clearer direction and confidence.

The cryptocurrency holdings of Boya Interactive have reached approximately 2.2 billion Hong Kong dollars. This means that Boya Interactive's current cryptocurrency holdings have exceeded the company's market value. In the second quarter of 2024, the company recorded revenue of about 104.8 million yuan, a year-on-year increase of 5.8%. Revenue from web games and mobile games was 29 million yuan and 69 million yuan, respectively, with a digital asset appreciation revenue of 6.74 million yuan. Regarding the reason for the revenue growth, Boya stated in the announcement: "Mainly due to the digital asset appreciation revenue generated by the cryptocurrency held by the Group."

Additionally, the company plans to increase its cryptocurrency holdings by up to $100 million in the next 12 months. Furthermore, Boya Interactive has formed a team dedicated to Web3 game development and related infrastructure research. Benefiting from the significant growth of cryptocurrency assets, its first-quarter profit increased by 1130% year-on-year, driving the company's stock price to nearly 3.6 times its highest level since the beginning of the year, becoming a typical asset-driven blockchain concept stock in the market. For this stock, Boya Interactive's performance depends on the volatility of the cryptocurrency market, and the stock price may continue to be driven by asset value growth.

II. Mining Concept

In recent years, blockchain mining concept stocks have received high market attention, especially during the volatility of cryptocurrency prices such as Bitcoin. Mining companies not only benefit from the direct income of digital currencies but also to a certain extent participate in the layout of other high-growth industries, particularly in the fields of Artificial Intelligence (AI) and High-Performance Computing (HPC). With the vigorous development of AI technology, the demand for AI computing power is rapidly increasing, providing new support for the valuation of mining concept stocks. Particularly, as power contracts, data centers, and their supporting facilities become increasingly scarce, mining companies can obtain additional revenue by providing computing power infrastructure for AI demands.

However, it is generally believed that not all mining companies can fully meet the needs of AI data centers. Mining operations typically prioritize cheap power supply, often choosing locations with lower prices and short-term power instability to maximize profits. In contrast, AI data centers place more emphasis on power stability, are less sensitive to changes in electricity prices, and tend to prefer long-term stable power supply. Therefore, not all existing power equipment and data centers of mining companies are suitable for direct transformation into AI data centers.

Mining concept stocks can be categorized as follows:

1. Mining companies with mature AI/HPC businesses: These companies not only have a presence in the mining field but also have mature AI or HPC businesses, receiving support from technology giants like NVIDIA. For example, companies such as Wulf, APLD, and CIFR are involved in cryptocurrency mining and also engage in building AI computing platforms, participating in AI inference, and other businesses, integrating mining and AI computing needs to a certain extent, attracting more market attention.

2. Focus on Mining and HODLing: These companies mainly focus on mining operations and hold a large amount of coins such as Bitcoin and other cryptocurrencies. CleanSpark (CLSK) is a representative of such companies, with its hodling accounting for 17.5% of its market capitalization. Additionally, Riot Blockchain (RIOT) is a similar company, with its hodling accounting for 21% of its market capitalization. These companies aim to profit from the future market price increase by accumulating Bitcoin and other cryptocurrencies.

3. Diversified Business Composite: These companies not only engage in cryptocurrency mining and hodling but also have involvement in AI inference, AI data center construction, and other areas. Marathon Digital Holdings (MARA) is a representative of this type of company, with its hodling accounting for 33% of its market capitalization. These companies typically reduce risks in a single area and enhance overall profitability through diversified business layouts.

With the increasing demand for AI, AI computing power and high-performance computing businesses will be more integrated with blockchain mining operations, potentially further increasing the valuation of mining companies. In the future, mining companies will not only be "miners" of digital currencies but may also become important infrastructure providers behind AI technology development. While this path is challenging, many mining companies are accelerating their layout in AI computing power and data center construction to seize a foothold in this emerging field.

1. MARA Holdings (MARA)

One of the largest enterprise Bitcoin self-mining companies in North America, founded in 2010 and publicly listed in 2011. The company is dedicated to mining cryptocurrencies, focusing on the generation of blockchain ecosystems and digital assets. Based on its proprietary infrastructure and intelligent mining software, the company offers hosted mining solutions, primarily mining Bitcoin. Similar to Riot, Marathon also experienced a 12.6% stock price drop, followed by further declines. However, Marathon's stock price has risen rapidly over the past year.

According to the latest data in October, MARA (Marathon Digital) has achieved an hashrate of 32.43 EH/s, becoming the first publicly traded mining company to reach this scale. It is estimated that after the commissioning of its new 152 MW power capacity, the hashrate will increase by approximately 10 EH/s. Recently, MARA acquired two data centers in Ohio and is constructing a third new site, adding 152 MW of mining power capacity, with plans to be fully operational by the end of 2025. Salman Khan, CFO of MARA, stated that the cost of this asset acquisition is approximately $270,000 per MW and expects these deployments to help the company achieve its 50 EH/s hashrate target by 2024.

In addition, MARA announced on November 18th the issuance of $700 million worth of Convertible Senior Notes, with a maturity date in 2030. The funds raised will be primarily used to purchase Bitcoin, repurchase the 2026 Notes, and support the expansion of existing operations. MARA expects to use the net proceeds from these notes, with up to $200 million allocated to repurchasing a portion of the 2026 Convertible Notes, while the remaining funds will be used for additional Bitcoin purchases and general corporate purposes, including working capital, strategic acquisitions, expanding existing assets, and repaying additional debt. This move further demonstrates MARA's long-term bullish stance on Bitcoin.

2. Core Scientific (CORZ)

Blockchain infrastructure and cryptocurrency mining services

Founded in 2017, Core Scientific Inc.'s business is mainly divided into two segments: equipment sales and hosting services, as well as self-built mining farms for Bitcoin mining. The company generates revenue through the sale of consumption-based contracts and providing hosting services, while the digital asset mining segment's revenue comes from the company's operated computing devices, which process transactions on the blockchain network and participate as part of the mining pool, earning digital asset rewards.

Recently, Microsoft (MSFT.US) announced a nearly $10 billion spending plan from 2023 to 2030 to lease servers from AI startup CoreWeave. CoreWeave has signed a new 120-megawatt (MW) high-performance computing power hosting agreement with Bitcoin mining giant Core Scientific. Through several expansions, CoreWeave currently hosts a total of 502 MW of GPU capacity in Core Scientific's data centers. Since signing the multi-billion-dollar contract with CoreWeave, Core Scientific's stock price has surged significantly, with a cumulative increase of nearly 300%. The company also plans to retrofit some data centers to host CoreWeave's over 200 MW of GPU capacity.

This 12-year hosting agreement is expected to bring Core Scientific a total revenue of $8.7 billion. Meanwhile, although its Bitcoin mining hash rate remains stable, its market share has declined from 3.27% in January to 2.54% in September.

Overall, Core has perfectly integrated the two major hot topics of AI and Bitcoin, especially in the AI data center space, where Core Scientific has won large contracts and actively expanded its customer base, demonstrating strong growth potential. Despite the decline in market share in the Bitcoin mining business, the company's progress in AI data centers provides robust support for its long-term stable growth, with future gains still promising.

3. Riot Platforms (RIOT)

Based in Colorado, USA, Riot Platforms focuses on blockchain technology development, support, and cryptocurrency mining operations. Previously, the company had also invested in several blockchain startups, including the Canadian Bitcoin exchange Coinsquare, but has since shifted its focus entirely to cryptocurrency mining.

Riot's stock price has experienced significant volatility, especially during Bitcoin price declines, with the company's stock price once dropping by 15.8%. However, despite this, the company's stock has still risen by over 130% in the past year.

Despite the recent market optimism driving a 66% surge in the stock price in just one week, Riot's operational performance is not ideal. According to its Q3 2024 financial report, the company's total revenue was $84.8 million, with Bitcoin mining revenue accounting for $67.5 million. The net loss reached $154.4 million, with a loss per share of $0.54, far exceeding the market's expected loss per share of $0.18. Furthermore, Riot's loss in the second quarter was $84.4 million, compared to a net loss of only $27.4 million in the same period last year. Overall, Riot's losses continue to widen, despite the short-term stock price increase. Whether long-term stock price growth can be achieved remains a question mark.

4. CleanSpark (CLSK)

Green Energy Cryptocurrency Mining

CleanSpark is a company focused on Bitcoin mining using renewable energy sources. The company's revenue in Q2 2024 increased to $104.1 million, a $58.6 million increase from the same period last year's $45.5 million, representing a growth rate of 129%. However, for the three months ending on June 30, 2024, the net loss was $236.2 million, equivalent to a loss per share of $1.03, compared to a loss of $14.1 million, or $0.12 per share, in the same period last year. It is worth mentioning that despite a market rally in early November, CleanSpark (CLSK) did not benefit from it as the company was halted during that period. The founder explained that the halt was due to a miscalculation in the share allocation ratio during an acquisition process. The company also announced the completion of the acquisition of GRIID with the goal of increasing the mining farm's total hash rate to 400 megawatts (MW) in the coming years. Additionally, CleanSpark holds a significant amount of Bitcoin and other cryptocurrencies. The coin holdings represent 17.5% of its market capitalization, meaning a considerable portion of its market value is supported by the held cryptocurrencies.

From a stock price perspective, CleanSpark is one of the Bitcoin miners with a focus on renewable energy, boasting long-term potential due to its green mining strategy and relatively lower energy costs. The company's acquisition of GRIID and expansion of mining capacity demonstrate a proactive strategic layout for expanding market share and enhancing competitiveness. However, while the company has seen significant revenue growth, investor focus on its profitability and cash flow will be a key factor influencing future stock price trends due to its sizable losses. With the impact of Bitcoin price volatility and energy cost fluctuations, CleanSpark's stock price may experience significant swings.

5. TeraWulf (WULF)

Engaging in cryptocurrency mining using green energy

With operational risks decreasing and profit margins increasing, energy companies are gradually becoming a significant force in the cryptocurrency industry. TeraWulf, a cryptocurrency subsidiary under Beowulf Mining Plc, recently revealed in regulatory filings that by 2025, the company's mining capacity is expected to reach 800 megawatts, accounting for 10% of the current Bitcoin network's computational power. TeraWulf focuses on providing sustainable cryptocurrency mining solutions, particularly emphasizing the use of renewable energy sources such as hydro and solar power, while also developing an AI data center.

Recently, TeraWulf announced an increase in the total size of its 2.75% convertible bonds to $425 million, with plans to use $118 million for stock buybacks. This financing also includes over-allotment options allowing initial purchasers to add $75 million within 13 days after issuance. The newly issued bonds will mature in 2030, with some funds allocated for share repurchases and the remaining funds for general corporate purposes.

TeraWulf stated that it will prioritize stock buybacks and continue to drive organic growth in its high-performance computing and AI fields, as well as potential strategic acquisitions. Following the announcement, TeraWulf's stock price has surged nearly 30% since last Friday, outperforming Bitcoin and other mining companies. Recently, mining firms have been raising funds through convertible bonds and Bitcoin-backed loans to cope with the post-halving decline in mining power prices.

Overall, TeraWulf's positioning in clean energy and AI mining showcases strong growth potential. In the short term, the company may benefit from the market's high interest in green energy and AI mining. However, considering the volatility of the mining industry and the overall market environment, long-term performance will still require continuous monitoring and evaluation. In the current scenario, TeraWulf's stock price increase has some speculative elements, but it is also expected to further drive growth through its sustainable development strategy.

6. Cipher Mining (CIFR)

Bitcoin Mining Company

Cipher Mining is mainly focused on developing and operating Bitcoin mining data centers in the United States, aiming to enhance the infrastructure of the Bitcoin network.

Recently, Cipher Mining announced a further expansion of its credit partnership with Coinbase, establishing a $35 million term loan facility. According to the financial report disclosed on November 1st, the company increased its existing $10 million credit facility to $15 million and added a $35 million term loan.

Additionally, as the demand for artificial intelligence technology in the crypto market grows, Cipher Mining's AI business valuation has also increased. However, compared to peer companies such as CORZ, APLD, and WUFL, Cipher Mining's stock price has lagged behind. While the company has made some progress in infrastructure investments in Bitcoin mining, its advancement in AI technology deployment has been slower, which may affect its short-term stock performance.

7. Iris Energy (IREN)

Renewable Energy for Bitcoin Mining

Specializing in Bitcoin mining globally through green energy sources, particularly hydroelectric power. Its primary focus is on clean energy-driven Bitcoin mining operations, with environmental sustainability as a core competitive advantage, which sets it apart from other mining companies. Compared to traditional coal and oil energy sources, IREN adopts clean energy mining to reduce carbon emissions and lower operational costs. IREN currently owns multiple clean energy-driven mining facilities, with significant infrastructure investments in clean energy-rich regions like Canada and the United States.

Furthermore, IREN is also exploring cloud mining, but the prospects for this part of the business are not as clear as its clean energy mining operation. While cloud mining as a business model can to some extent reduce the need for mining hardware and provide investors with more flexible profit pathways, its revenue model and market acceptance are still in the early stages and have yet to demonstrate significant profitability compared to traditional Bitcoin mining. Therefore, IREN's exploration in cloud mining can be seen more as a pilot project, far from mature, and its valuation is difficult to overestimate.

In terms of monetizing energy assets, IREN's progress and potential are currently not as strong as some of its competitors, such as CIFR (Cipher Mining) and WULF (Stronghold Digital Mining). These companies have made progress in effectively integrating traditional energy assets and applying clean energy, establishing a stronger market competitiveness. While IREN's unique advantage in green energy mining should not be underestimated, compared to CIFR and WULF, its monetization process is still lagging behind, making it difficult to generate sufficient funds inflow in the short term.

8. Hut 8 (HUT)

Headquartered in Canada, Hut 8 is a company primarily engaged in cryptocurrency mining in North America and is one of the largest innovative digital asset miners in North America. The company operates large-scale energy infrastructure and consistently adheres to environmentally friendly operating practices.

In 2023, Hut 8's annual revenue reached $1.2121 billion, representing a 47.53% year-over-year growth. As of the quarter ended September 30, 2024, revenue further increased to $43.74 million, a 101.52% year-over-year growth. This surge brought the total revenue for the past 12 months to $1.9402 billion, with a yearly growth rate of 209.07%.

According to the third-quarter report, Hut 8 has accelerated the pace of building its digital infrastructure platform in recent months and advanced its commercialization process. All company data show strong growth momentum, reinforcing its business development.

9. Bitfarms (BITF)

Based in Canada, Bitfarms focuses on the development and operation of Bitcoin mining farms and continues to expand its mining scale. The company recently announced a plan to upgrade the 18,853 Antminer T21 Bitcoin mining machines originally planned for purchase from Bitmain to the S21 Pro model with an additional investment of $33.2 million. According to the third-quarter financial report, Bitfarms has amended its purchasing agreement with Bitmain, and the upgraded mining machines are expected to be delivered between December 2024 and January 2025. Benefiting from the use of the latest generation of mining machines, Bitfarms has significantly reduced its mining machine cost: from $40.6 per PH/s in the first quarter to $35.5 in the second quarter, and further down to $29.3 in the latest quarter, according to TheMinerMag's analysis.

Overall, Bitfarms has lowered costs and increased mining efficiency by updating mining equipment and optimizing its purchasing strategy, demonstrating strong growth potential. This strategy not only enhances the company's profitability but also strengthens its position in the competitive cryptocurrency market. With further reductions in mining machine costs, Bitfarms is poised to continue gaining advantages in the Bitcoin mining sector, especially in the event of Bitcoin price recovery or increased market demand.

10. HIVE Digital Technologies (HIVE)

Cryptocurrency Mining Company, HPC Business.

Hive Digital recently announced the acquisition of 6,500 Canaan Avalon A1566 Bitcoin miners and plans to increase its total hash rate to 1.2 EH/s, showcasing the company's continued commitment to cryptocurrency mining. However, since the end of last year, Hive Digital has explicitly stated that it will allocate more resources and focus on High-Performance Computing (HPC) in the future. The company believes that the HPC business has a higher profit margin compared to Bitcoin mining and presents certain technological barriers that can lead to more sustainable revenue growth. As a result, Hive has transitioned 38,000 Nvidia data center GPU cards originally used for Ethereum and other cryptocurrency mining into on-demand GPU cloud services, opening a new chapter in its AI and HPC endeavors.

This strategic transformation is in line with industry trends. Similar to other mining companies like Hut 8, Hive quickly shifted its focus to HPC and AI business after Ethereum's transition from POW to POS. Today, Hive's HPC and AI business generate revenue more than 15 times higher than Bitcoin mining, and the demand for GPU computing is rapidly growing. According to a report by Goldman Sachs, the outlook for the GPU cloud services market is promising. Fortune Business Insights predicts that the GPU service market in North America will grow at a compound annual growth rate of 34% by 2030. Especially with the continuous rise in AI project demands, technologies like large language models behind ChatGPT are just beginning to take off, and almost every company needs significant GPU computing power to support the operation and development of these technologies.

From an investment perspective, Hive Digital's transformation strategy has laid a solid foundation for its future growth. While the company still has a presence in the cryptocurrency mining sector, with the rapid development of HPC and AI business, Hive has gradually reduced its over-reliance on traditional Bitcoin mining, paving the way for more diversified and high-profit revenue streams.

III. Infrastructure and Solutions Providers

Mining Hardware/Blockchain Infrastructure Concept Stocks refer to companies that focus on Bitcoin mining hardware, blockchain infrastructure development, and related technology services. These companies primarily profit through the design, manufacturing, and sale of specialized mining equipment (such as ASIC miners), offering cloud mining services, and operating the hardware infrastructure needed for blockchain networks. Mining hardware manufacturers are at the core of blockchain infrastructure as they provide hardware devices for cryptocurrency mining, such as Bitcoin. ASIC (Application-Specific Integrated Circuit) miners are the most common type of mining hardware specifically designed for cryptocurrency mining. Mining hardware manufacturers' revenue primarily comes from two main sources: mining equipment sales and mining hosting and cloud mining services.

Generally speaking, the price of mining machines is influenced by multiple factors, including the fluctuation of the Bitcoin market, the production cost of mining machines, and the stability of the supply chain. For example, when the price of Bitcoin rises, miners' revenue also increases, and the demand for mining machines usually rises accordingly, thereby driving the revenue growth of mining machine manufacturers. In addition to mining machine production, blockchain infrastructure also includes mining pools, data centers, and other cloud service platforms that provide computational power support.

For investors, mining machine manufacturers and blockchain infrastructure companies may offer higher growth opportunities, especially during an upward cycle in the cryptocurrency market. The demand for mining machines is positively correlated with the price of Bitcoin. However, such companies also face high volatility risks, influenced by multiple factors such as market sentiment, technological innovation, and regulatory policies. Therefore, when investing in such concept stocks, besides having a positive outlook on the cryptocurrency market, one also needs to consider the potential risks brought by market uncertainty.

1. Canaan Inc. (CAN)

Research and development of blockchain hardware products

Founded in 2013, Canaan Inc. released the world's first ASIC chip-based blockchain computing device in the same year, leading the industry into the ASIC era, gradually accumulating rich chip mass production experience. In 2016, the mass production of 16nm products marked Canaan Inc. as the first camp in the mainland China region with an advanced process. From 2018 to the present, Canaan Inc. has successively achieved the global first mass production of a self-developed 7nm chip and the commercial edge AI computing chip Kendryte K210 based on RISC-V self-development.

Since its establishment, Canaan Inc. has become an important player in the blockchain hardware field, relying on its leading ASIC mining machine technology and self-developed chips. Compared to other mining machine manufacturers, CAN and BT-DR, which can increase mining profitability with self-produced mining machines, have more potential upside. In the past year, despite the market experiencing a bearish trend, Canaan Inc.'s mining machine sales volume has remained at a high level, especially against the backdrop of the rebound in Bitcoin prices, and future sales are expected to grow significantly.

The biggest potential upside factor is the change in mining machine prices. If mining machine prices rise—for example, due to demand exceeding expectations or limited supply—an increase in mining machine prices may drive up the valuation multiple of mining companies, forming a "Davis Double Click" effect, thus enhancing the overall company valuation. CAN recently signed two significant institutional orders, with HIIVE Corporation purchasing 6,500 units of Avalon A1566 mining machines, which will further boost its sales and revenue growth, demonstrating market recognition and demand for its mining machines.

From the fundamental and market expectation perspectives of Canaan Inc., the current stock price does not fully reflect its future potential. Assuming the Bitcoin market rebounds and miner prices remain stable or rise, Canaan Inc.'s sales revenue and profits will experience significant growth, further driving valuation upward.

2. Bitdeer (BTDR)

Provides cloud mining services and miner manufacturing

Bitdeer offers global cryptocurrency mining computing power, allowing users to lease computing resources for Bitcoin mining. The company provides hash rate sharing solutions, including cloud hash rate and hash rate market, while also offering one-stop miner hosting services covering deployment, maintenance, and management to support efficient cryptocurrency mining.

Recently, Bitdeer released its new-generation liquid-cooled miner SEALMINER A2, as the second-generation product of the SEALMINER series. The SEALMINER A2 miner is equipped with Bitdeer's self-developed second-generation chip SEAL02, which has significantly improved energy efficiency, technical performance, and stability compared to the A1 series. The A2 series includes an air-cooled SEALMINER A2 and a liquid-cooled SEALMINER A2 Hydro, designed to meet mining needs in different environments. Both miners adopt advanced cooling technologies, optimize power consumption control and hash rate performance, ensuring stable operation under heavy loads. According to test data, the A2's energy efficiency is 16.5 J/TH, achieving a hash rate of 226 TH/s, slightly lower than mainstream miners on the market like Bitmain and MicroBT at 13.5 J/TH. The company also stated that the A2 has entered mass production and is expected to add 3.4 EH/s of hash rate by early 2025. Bitdeer also plans to complete the tape-out design of the SEAL03 chip in the fourth quarter, targeting an energy efficiency of 10 J/TH.

Overall, Bitdeer is at a key stage of innovation and growth, especially in the liquid-cooled miner and hash rate sharing areas. It is worth noting that as a cloud mining platform, it provides hash rate leasing and hosting services, rather than just traditional miner sales. Unlike traditional miner manufacturers, cloud mining and hosting companies are more flexible in capital and resource allocation, able to expand market share by providing on-demand computing resources to adapt to different investment scales. Therefore, while the overall trend of the cryptocurrency market affects Bitdeer's performance, the diversity and innovativeness of its business model may help it maintain relatively stable performance amid market fluctuations.

3. BitFuFu (FUFU)

Cloud Mining Service and Digital Asset Management Service

BitFuFu is a Bitcoin mining and cloud mining company supported by Bitmain, committed to providing cloud mining services to global users, allowing users to participate in Bitcoin mining without the need to purchase hardware. According to the latest third-quarter financial report, BitFuFu holds approximately $104 million in digital assets, equivalent to 1600 Bitcoins. Of these, 340 Bitcoins are owned by the company, and the remaining Bitcoins belong to customers of cloud mining and custody services. BitFuFu is not only a service provider in the Bitcoin mining field but also a significant Bitcoin asset manager.

Furthermore, BitFuFu has reached a two-year credit agreement with Antpool, a subsidiary of Bitmain, with a maximum loan amount of $100 million. This credit agreement further solidifies the cooperation between BitFuFu and Antpool and enhances its flexibility in capital operations. With the fluctuation of the Bitcoin market, more Bitcoin mining companies (such as MARA and CleanSpark) have also started to adopt financing methods like Bitcoin-backed loans to flexibly utilize their Bitcoin assets to support business development and capital expansion.

From an investment perspective, BitFuFu has the support of Bitmain and Antpool, giving it a unique advantage in hardware supply and hash rate resources, enabling BitFuFu to provide efficient and stable mining equipment and help optimize mining farm operations and pool support. Therefore, BitFuFu has a clear technological and resource advantage in the cloud mining field, attracting more users and capital.

Overall, with the gradual recovery of the Bitcoin market and the increasing demand for cloud mining, BitFuFu may benefit from this trend. Compared to traditional mining companies, cloud mining allows investors to participate in Bitcoin mining at a lower cost, especially suitable for users without hardware resources.

IV. Exchange Concepts:

1. Coinbase (COIN)

A cryptocurrency exchange platform, providing digital currency trading and storage services

Founded in 2012, Coinbase went public on the Nasdaq in 2021 and is the first and only legal and compliant publicly traded cryptocurrency exchange in the United States. This status has made it the largest cryptocurrency exchange in the United States by trading volume, and it has also attracted many institutions to choose it as their preferred platform for custodial cryptocurrency assets.

Coinbase jointly issued the US dollar-pegged stablecoin USDC with Circle and expanded its diversified businesses such as staking and custody services. In addition, Coinbase is a core holding stock of ARK Invest fund manager Cathie Wood, who has publicly expressed optimism about it on multiple occasions.

The stock price of Coinbase is highly correlated with Bitcoin's price, for example, its all-time high occurred on November 8, 2021, almost coinciding with Bitcoin's all-time high on November 10, 2021. Furthermore, at the recent low point on November 21, 2022, the stock price bottomed out in sync with the Bitcoin price. From the high of $368.9 in 2021 to a low of $40.61, the stock price experienced a maximum decline of 89%, with a fluctuation range even exceeding Bitcoin's simultaneous 78% decline, reflecting Coinbase's amplified leverage effect in the crypto market.

In the past six months, the fluctuation of Coinbase's stock price has mainly been affected by regulatory pressure and the Bitcoin ETF approval process. In 2023, the approval of the Bitcoin ETF was initially seen as a significant positive development, but the market subsequently worried that such a product might divert attention from Coinbase's traditional business model, causing a temporary price drop. Nevertheless, the post-election market dynamics have brought positive momentum to Coinbase.

With Trump winning the election, the anticipated crypto-friendly policies boosted market confidence and led to a rapid rise in Coinbase's stock price. Early in the election, the stock price briefly dipped to $185 but eventually surged to around $329. It can be expected that in the relatively closed and compliant U.S. crypto market, the Bitcoin investment demand from retail investors will continue to benefit Coinbase. As a leading U.S.-based legal exchange, Coinbase has a solid foundation, and its high compliance status gives it a greater advantage during policy tailwinds. In the future, as more retail investors enter the market, Coinbase may attract significant inflows.

2. Bakkt Holdings (BKKT)

Bakkt is a leading cryptocurrency platform dedicated to providing compliant crypto asset custody and trading services to institutional investors. The company holds a cryptocurrency custody license issued by the New York State Department of Financial Services (NYDFS) and has gained trust, especially among institutional clients, due to its compliance and robust regulatory background.

Bakkt was initially founded by Intercontinental Exchange (ICE) and later spun off to become a publicly traded independent company, showcasing the integration between traditional finance and the crypto economy. Recently, Bakkt's stock price has experienced a significant increase, mainly due to plans for a full acquisition of Bakkt by a media and technology group under Trump (DJT). According to the Financial Times, Trump's company DJT is in deep acquisition negotiations with Bakkt, and if the acquisition plan succeeds, it will further advance Trump's presence in the cryptocurrency market and provide Bakkt with financial support and more growth opportunities.

On the day of the announcement, Bakkt's stock price surged by 162%, and continued to rise over 15% in after-hours trading. DJT's stock price also rose by approximately 16.7%. Additionally, Bakkt's pre-acquisition valuation was slightly above $150 million, based on the company's recent financial performance and the volatility of the crypto market. Despite Bakkt's revenue falling short of expectations (with revenue of $328,000 and operating losses of $27,000 in the three months ending September 30).

From an investment perspective, Bakkt is a company with significant potential but still faces challenges. Firstly, Bakkt has a unique advantage in compliance and institutional services, especially given the trend of institutional investors entering the market. Secondly, Bakkt's recent sharp increase in stock price was mainly driven by the Trump Group's acquisition intent. This acquisition will provide Bakkt with more funding and resources, potentially accelerating its development in the cryptocurrency trading space. However, Bakkt's past profitability has been poor, and its primary revenue comes from crypto asset custody and trading services, the growth potential of which remains uncertain. Therefore, when investing in Bakkt, one needs to consider the sustainability of its revenue model and the level of market competition.

Five, Payment Concept:

Block (SQ)

A payment service provider founded in 2009, formerly known as Square Inc. As early as 2014, Square began accepting Bitcoin as a payment method, and since 2018, Square Inc. has been active in the Bitcoin space. Starting in 2020, Block made significant purchases of Bitcoin for payment business and as corporate asset reserves. In the third quarter of the 2024 fiscal year, Block's total net revenue reached $59.76 billion, achieving a solid 6% growth compared to the same period last year's $56.17 billion. Excluding Bitcoin-related revenue, total net revenue increased to $35.5 billion, up 11% year-over-year. Net profit shifted from a net loss of $93.5 million in the same period last year to a profit of $281 million, a 402.1% year-over-year increase;

The strong application support of Square's business and a good asset reserve, stable cash flow generated by the business, etc., are among the reasons why it is considered a stable concept stock. Building on this foundation and influenced by the certainty factor of Bitcoin's boost after Trump's election, Square has achieved a 24% increase in the past half-month.

As a concept stock in the payment space, paying attention to Block is akin to paying attention to PayPal. As we all know, PayPal, as a global payment giant, provides digital payment services to global merchants and consumers. In recent years, they have also shown a strong interest in blockchain technology, with a key initiative being the launch of the PayPal USD (PYUSD) stablecoin in 2023. This is an Ethereum-based, USD-backed stablecoin and is a core part of PayPal's strategy in the digital payment and blockchain integration realm. PayPal has also used PYUSD for the first time to make blockchain investments by supporting a company called Mesh, which focuses on digital asset transfer and embedded finance.

On the other hand, Block's focus in the blockchain space is more centered on Bitcoin, integrating it into payment services and company asset reserves.

Summary:

The demand for blockchain concept stocks is rapidly increasing and may even surpass the demand for traditional tech stocks and cryptocurrencies themselves. As blockchain gradually expands from its early cryptocurrency applications to more widespread industry solutions, the market's demand for related technology and infrastructure has also significantly increased. Compared to traditional tech stocks, blockchain concept stocks have more prominent growth potential as they rely not only on technological innovation but also closely relate to the digital transformation of the global financial market and decentralization trends.

With the maturity of blockchain technology and optimization of policy environments, the market prospects for blockchain concept stocks will become even more promising. Especially against the backdrop of gradually clearer regulatory policies on cryptocurrencies by governments worldwide, blockchain enterprises are expected to experience explosive growth on a compliant basis. We look forward to seeing more traditional industries adopt blockchain technology, driving further technological innovation and market demand in this field. Waterdrip Capital will continue to have a positive outlook on the long-term development potential of the blockchain space, closely monitoring related companies and their technological advancements, actively paying attention. In the coming years, blockchain concept stocks are poised to become one of the most attractive investment directions in the global capital markets.

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