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For many, making an investment directly in cryptocurrencies may seem inherently risky. After all, the price of most cryptocurrencies doesn’t go much beyond investor interest. Once the enthusiasm has waned or the investment has dried up, many cryptocurrency projects simply cease to exist. leaving informal retail investors to take over the exchange. However, there would possibly be a safer way to invest in the crypto industry as a whole. Enter those cryptocurrency mining stocks.
In the case of Bitcoin (BTC-USD), cryptocurrencies themselves cannot exist without an entire industry of computer farms and embedded circuits that mine them. Therefore, making an investment in the sector that promotes the availability of cryptocurrencies is a smart way to do it. of the inherent threat of the currency itself.
For investors looking to invest in crypto mining stocks, there are two main criteria they should focus on. The first is the profitability and power of how miners do it. The moment centers on how the company manages its Bitcoin reserve once mined. In fact, those two points point directly to the company’s revenue and liquidity.
While it’s hard to say what the end results will be, it’s a win-win scenario for Riot Platforms owners. That’s because even if it fails, RIOT will keep the money it planned to buy back, meaning its reserves remain full. This bodes well for its long-term stability and for weathering any Bitcoin-related economic crisis.
Additionally, the company’s Bitcoin mining profits increased by 55%, from $48 million to $74. 5 million year-over-year in the first quarter of 2024. This underscores the company’s strategy for achieving strong cash flows, which will be even more true if it incorporates Bitfarms. .
When a company increases its quarterly profits year after year while cutting expenses, no one earns more than shareholders. This is precisely the trajectory that Hut 8 Mining (NASDAQ: HUT) is following with an existing cost reduction. The decision to do so follows the merger of all of the company’s shares with USBTC, which endowed it with proprietary software and operating principles.
As a result, Hut 8 was able to leave its Drumheller facility as an expensive and inefficient site for Bitcoin mining, eventually deciding to shut them down in March 2024. In the same month, HUT announced its financial results for the first quarter. 2024 with an impressive $30 million profit from Bitcoin mining. This is a staggering 300% year-over-year increase from $87. 6 million in profits in March 2023.
One way to protect yourself from the competitive nature of the Bitcoin mining industry is to invest in an exchange-traded fund (ETF) that brings together all of its other competitors. That’s the merit of the Valkyrie Bitcoin Miners ETF (NASDAQ:WGMI). It gives investors who seek exposure to the sector without directly betting on the operations of a single company.
In addition to offering exposure to mining corporations, WGMI also provides them with some protection by maintaining ancillary participants in the industry. This means that 17% of its current composition is made up of corporations such as Nvidia (NASDAQ:NVDA) and CleanSpark (NASDAQ: CLSK).
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At the time of publication, Viktor Zarev did not (directly or indirectly) hold any position in the securities discussed in this article. The perspectives expressed in this article are those of the author, subject to InvestorPlace. com’s publication rules.
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