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What happened

Many companies with deep ties to the cryptocurrency market saw strong stock gains in July 2023. MicroStrategy (MSTR -1.63%) posted a 27.9% gain last month, CleanSpark (CLSK -3.77%) shares rose by 40%, and Riot Platforms (RIOT -4.62%) took the lead with a 56.7% price increase, according to data from S&P Global Market Intelligence.

Moves like these usually come alongside rising Bitcoin (BTC 0.42%) prices, but that was not the case last month. Bitcoin actually saw its token prices sliding 3.9% lower over the same period. So why did Cleanspark, MicroStrategy, and Riot soar without that typical tailwind at their backs?

So what

The crypto-adjacent industry demonstrated its commitment to mining and owning Bitcoin for the long haul.

For example, Riot’s operations report on July 6 paid more attention to the Bitcoin-mining company’s equipment purchases and installations than to the 460 tokens Riot mined and 400 coins sold in June. Furthermore, the report highlighted Riot’s ability to scale down its Bitcoin production and resell energy to a strained Texan power grid as the heat waves of June kept air conditioners running.

Fellow Bitcoin miner CleanSpark wasn’t affected by the Texas heat, with most of its mining equipment hosted in Washington state. So the company ran its slightly smaller collection of mining rigs at full capacity, producing 491 new coins in July and selling 413 of them in order to finance operations. At the same time, CleanSpark shone a spotlight on its expanding facilities in Washington and recently acquired assets in Georgia. The company is buying thousands of mining machines, securing energy supplies to power them, and expanding its Bitcoin-mining capacity as quickly as possible.

MicroStrategy is a different story. The business intelligence software specialist doesn’t mine new Bitcoins like CleanSpark and Riot do, but bends over backward to invest in the cryptocurrency. As revealed in the second-quarter earnings release on Aug. 1, the company bought 12,333 new Bitcoins in the second quarter and held a total of 152,800 tokens on its balance sheet by the end of July. The purchases were backed by MicroStrategy’s operating cash flows and available credit facilities.

On top of these Bitcoin-bullish moves, the global and American economies showed signs of life in July. These three stocks posted their strongest gains of the month on July 13, rising in tandem as inflation rose slower than expected. That’s good news in the long run for debt-burdened businesses, and these three Bitcoin wranglers fit that bill.

Now what

It’s worth mentioning that companies adjacent to the crypto industry often amplify the gains and drops of the underlying digital assets. In this case, Bitcoin itself was unmoved by the economy’s quirks because the cryptocurrency itself has nothing to do with interest rates on financial debt. But CleanSpark has more debt than cash on hand, and MicroStrategy has sunk 97% of its cash into Bitcoin ownership. Riot Platforms has the cleanest balance sheet of this bunch, but even this solid business would be up the creek without a digital paddle if Bitcoin prices drop again.

So it’s no shock to see Riot, CleanSpark, and MicroStrategy making big moves in one direction while Bitcoin slowly slides in the opposite direction. These stocks can be seen as a jumpy harbinger of the distant future — today’s risk-relieving economy trends may pave the way to even faster mining facility builds and Bitcoin buys in upcoming quarters.

As for Bitcoin’s modest price changes in recent weeks, the leading cryptocurrency strikes me as an indispensable investment idea right now. This is not the time or the place to go into a detailed discussion of that idea, but you can read up on the upcoming “halvening” event right here.

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