Assetable Trade Ideas: A Primer to the Bear Market

crypto-related equities have benefitted from a nasty squeeze during this latest pump in crypto

here are my thoughts and some actionable trade ideas you can take over the coming weeks, as well as the future success of btc mininig equities.

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first, let's talk the conditions and relevant data for cryptomining in this environment.

it costs, on average ~13,000 to mine a btc

here is a good and simple link for understanding the cost of mining btc :

BTC">How Much Does it Cost to Mine a Bitcoin? - Miner Daily

btc has traded at a market value of 24,646 over the past 1,400 days (since the 2018 bottom).

mining companies depend on two things:

1. the strength of the balance sheet (cash, BTC, plant & inventory, debt) 2. Operations (overhead/mining cost, EH/s, btc mined, energy usage)

most companies went public at all time highs (2013, 2017, 2021), when capital was most abundant and profitability was through the roof

most over-ledgered and took on high debt, but their recent flush of earnings cushioned the blow.

others suffered from debt obligations- CORZ ARBK CIFR MARA SDIG

2022 resulted in a bankruptcy by @Core_Scientific an unload of btc and facilities by @ArgoBlockchain 70m debt obligation by @SDIGigital resulting in a net loss of ~30m

miner capitulation can be examined through two excellent data science models:

the Puell Multiple & the MVRV Z-score

the Puell Multiple examines the current daily issuance by block reward to that of the past year.

it shows us how profitable mining is, and signals periods where the price of btc is low enough for capitulatory events (such as the ones listed above) are most likely to occur

according to our Puell Multiple, this period took place primarily throughout the fall of 2022. (same time of the ARBK CORZ SDIG fiascos)

the MVRV Z-Score

this model examines the difference of the current market price of btc to the average realized price of all historically transacted btc , and compares that the relationship of a standard deviation of current market cap

believe me this is fun for math nerds

it shows periods of time where market value is in line with that is historically fair value for btc in terms of all historic usage - a globally accounted for signal for capitulation.

the hope:

contagion in the cryptomining space doesn't continue. it seems as though most companies have strategized for outstanding debt and lowered earnings for the duration.

it will be the companies with the strongest balance sheets and operations who will survive the longest

keep an eye out for miners accumulating assets and buying up losing companies

ex. GLXY buying up ARBK facilities :

also pay attention to top miner in terms of the two primary elements of success

let's take a look at some EOY number for 2022

this first figure illustrates data highlights pertaining to mining performance, PH efficiency, balance sheet and revenue data

credit - @cazenove_uk

this figure show us which crypto miners mined the most bitcoin in 2022 (some companies excluded from list

credit - @cazenove_uk

clear winners - RIOT BITF HIVE CLSK

the ability to grow in a bear market sets you up for outpaced success in the future.

CLSK showed a tremendous example of this - increasing to 6.25 EH (+225% from 2021)

source - @cazenove_uk

Based on balance sheet health and mining performance, and sustainable practices, i am personally watching

BITF BTBT CLSK HIVE HUT IREN RIOT

i truly believe these are long-term winners as it currently stands...but let's not get too ahead of ourselves!

those who weather the storm will ultimately survive for the next cycle. intermittently...the suffer boom and bust bleed outs.

after all - miner profitability, expansionary practices, and balance sheet health all depend on the profitability of btc, which lessens in accumulations

so here is where the actionable trade ideas come in. how can we take advantage?

let's talk a few strategies👇

1. research and understanding of cryptomining and bitcoin fundamentals.

we discussed balance sheet strength and operating performance. these will help you find strong miners to buy during discount opportunities as long-term investment.

here's how we can go a little deeper

balance sheet -

1. how much btc is held (a commodity for collateral w/ a capped supply and growth potential) 2. debt metrics. how do all short and long term assets compare to assets and foreseeable cash flows 3. non liquids. financially stable facilities produce revenue

operations -

1. profitability 2. EH deployed v expectations 3. energy costs 4. btc mined per month/year 5. btc sold to cover costs

understanding these metrics will provide you the best insight into which cryptomining companies are in for long term gains

the next actionable trade idea is playing the bear market

this happens two ways:

1. buying puts on rips and squeezes 2. dollar cost averaging into bleeds for long term holding

a setup for which i will be buying puts

BTBT

miner valuations are not sustainable at these levels as they are still in recovery stages and mass inflows for growth are not sustainable at the later stages of bear markets. It also takes much less volume to produce a squeeze

This should say assets compared to debt

This post is based on this twitter thread.