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You might be hearing a lot about CHARM stocks over the next couple of years.
Here’s everything you need to know about the companies leading the next industrial age.
What Are CHARM Stocks?
CHARM is an abbreviation used to describe some of the best bitcoin mining stocks in the
market, specifically Core Scientific, Hut 8 Mining, Argo Blockchain, Riot Blockchain, and Marathon Digital.
The term was coined by engaged value investor, builder, and explorer Mike Alfred to bring awareness to these companies,
The value of these mining companies will rise with the price of bitcoin since many of them are not selling the bitcoin they earn from mining.
CHARM Stocks: A Brief Background on Mining
Miners receive bitcoin as a “block reward” for essentially auditing the decentralized Bitcoin Blockchain.
The process of verifying transactions and adding blocks to the blockchain requires extraordinary amounts of computing power and electricity, plus expensive hardware that can be difficult to acquire.
A miner’s ability to earn a block reward depends on its hashrate, which measures the computational power per second used when mining.
Miners increase their hashrate — and probability of earning more block rewards — by increasing the number of machines in their mining fleet.
However, the network’s overall hashrate increases with each added machine, making it more difficult for any operation to successfully mine a block.
Approximately every two weeks, the Bitcoin network adjusts the difficulty to mine a block. Miners without adequate computing power may be forced to go offline if it becomes economically infeasible to compete for blocks they have no chance of winning.
Miners differentiate themselves by optimizing two variables on the path to profitable mining: maximize hashrate and minimize production costs.
Additionally, and perhaps most importantly, miners that can hodl their bitcoin will outperform and outlast those that cannot.
Their ability to hodl essentially comes down to how well-capitalized they are and the commitment of their management.
Understanding CHARM Stocks
Here are the common threads amongst CHARM stocks:
- Committed to hodling earned bitcoin
- Premier customer status with mining suppliers like Bitmain or MicroBT
- Well-capitalized to survive the next bitcoin bear market
These companies have a balance-sheet-first approach to business management. The amount of BTC on their balance sheet is the primary driver of their respective market caps.
Miners that must sell their BTC to pay for production costs are not going to make it.
Miners that can’t get Bitmain to answer their calls or emails are not going to make it.
Miners without access to the public markets are not going to make it.
CHARM Stocks: A Closer Look
#1. Core Scientific (CORE)
- Performance over 1-Year: N/A
- Market Cap: $4.3 billion
- Expected 2022 Hashrate: 31 EH/s
Core Scientific provides blockchain infrastructure and hosting for clients, self-mines bitcoin, and develops blockchain technology. It is a 100% net carbon neutral operation.
It is the largest vertically integrated miner in North America with a current total hashrate of 11 EH/s and expects to increase that number to 31 EH/s by the end of 2022.
Core Scientific has sky-high self-mined margins sitting at 91%.
Its self-mined break-even bitcoin price is $2.7K, and its hosted client break-even price is $4.6K.
In 2021, Core Scientific self-mined 1,683 bitcoin in the first six months compared to 1,167 from Riot and 846 from Marathon.
Core Scientific has an industrial advantage over other miners due to its large-scale hosting operation, which provides diversified revenue streams beyond balance-sheet hodling.
Core Scientific is going public via SPAC in a merger with Power & Digital Infrastructure Acquisition Corp (XPDI). It will eventually trade on the Nasdaq under the ticker symbol “CORE.”
#2. Hut 8 (HUT)
- Performance over 1-Year: +1,450%
- Market Cap: $1.94 billion
- Expected 2022 Hashrate: 6.0 EH/s
Hut 8 is a Canadian mining company that owns more self-mined bitcoin than any other publicly-traded company worldwide.
Its total bitcoin balance held in reserve reached 4,450 as of August 31, 2021.
Hut 8’s management is committed to its “hodl strategy” as it continues to mine approximately 9-10 bitcoin per day.
Hut 8’s current hashrate is 1.37 EH/s and expects it to grow to 6.0 EH/s by mid-2022.
It has nearly 12,000 additional machines incoming from MicroBT to achieve these projections.
Hut 8 expects to grow its power capacity to 209 MW by mid-2022.
#3. Argo Blockchain (ARBK)
- Performance over 1-Year: N/A
- Market Cap: $807 million
- Expected 2022 Hashrate: 3.7 EH/s
Argo went public in September 2021 and is the smallest of the CHARM stocks.
It recently struck ground in West Texas to begin construction on its newest facility. This will be Argo’s fourth facility, the others located in Baie Comeau, Gatineau, and Mirabel.
Argo purchased 20,000 mining machines for its data center buildout in West Texas.
This purchase will increase its hashrate by more than 2 EH/s, reaching as high as 3.7 EH/s once fully deployed.
Argo held 1,836 BTC at the end of September, recording a mining margin of 84%.
Argo is contributing to Texas’s rise as the mining powerhouse of North America.
#4. Riot Blockchain (RIOT)
- Performance over 1-Year: +803%
- Market Cap: $2.86 billion
- Expected 2022 Hashrate: 7.7 EH/s
Riot Blockchain has a massive facility in Texas and another hosting site in New York.
Riot’s Whinstone facility in Texas is the single largest Bitcoin mining and hosting facility in North America, as measured by its 300 MW developed capacity.
In June 2021, Riot commenced an expansion project at the Whinstone facility that will eventually increase its current capacity to 700 MW. The company expects to complete this buildout by Q2 2022.
Riot currently has a deployed hashrate capacity of 2.2 EH/s and expects to grow it to 7.7 EH/s by the end of 2022.
Riot holds 3,128 BTC on its balance sheet, mining an average of 7.42 BTC per day at a 70% margin during the previous quarter.
Riot Blockchain will be one of the dominant forces in the Texas mining revolution.
#5. Marathon Digital (MARA)
- Performance over 1-Year: +2,099%
- Market Cap: $5.13 billion
- Expected 2022 Hashrate: 13.3 EH/s
Marathon was a patent company 10 months ago. Today, it’s on pace to become North America’s leading miner.
Marathon expects to grow its hashrate from 2.09 EH/s to 13.3 EH/s by mid-2022.
That’s tremendous growth.
Marathon focuses on investing in miners rather than infrastructure, a strategy used to maximize the flexibility of its business model and ability to adapt to changes in regulations and power requirements.
And invest in miners it does — Marathon recently purchased 130,000 S19 miners from Bitmain.
One of the common threads for CHARM stocks is their relationship with suppliers.
Amongst the group, Marathon might just have the best relationship with its supplier Bitmain.
Marathon has 6,695 total BTC on its balance sheet.
It has self-mined 1,758 at a blended mining cost of $5,612 per BTC and purchased another 4,937 at an average cost of $31.1K apiece.
Alternatives to CHARM Stocks
Owning the underlying asset – bitcoin – is preferred to owning third-party assets built around it.
That doesn’t mean Hut 8 or Marathon won’t outperform BTC over the next five years; they just come with more counterparty risk.
Therefore, the primary alternative to buying CHARM is to go and buy bitcoin.
MicroStrategy (MSTR) stock is another option if you want to stay in the public market.
The company’s CEO Michael Saylor has essentially turned his software company into a BTC holding company, acquiring billions worth over the last year. MSTR is a leveraged BTC ETF at this point.
Speaking of ETFs, a futures bitcoin ETF just got approved, but it’s a suboptimal product and not something we recommend due to inevitable tracking errors and high fees.
GBTC is probably a better option at the moment and will likely convert into a bitcoin spot ETF within the next two years.
Last, a blockchain ETF will provide exposure to CHARM, but with dozens of additional holdings.
The best blockchain ETFs include BKCH, BLOK, and BLCN.
There are several bitcoin proxies in the stock market now. But few can compare to the industrialized hodlers that are CHARM.
Bottom Line: CHARM Stocks
You’ll be hearing more about CHARM as the bitcoin bull market progresses.
Owning them in tax-advantaged accounts is another way to benefit from the generational opportunity in bitcoin.
This article is for informational purposes only. It is not intended to be investment advice.