The Dark History of the Three Major Bitcoin Mining Companies in the US Stock Market: They Have Made Pharmaceuticals, Real Estate, and Automobiles, But They Have Never Made Bitcoin

Wu said the author | miaohash

Editor of this issue | Colin Wu

As the cryptocurrency bull market accelerates, Bitcoin mining stocks listed on the US stock market have also fallen into a frenzy. The three typical benchmarks RIOT, BTBT and MARA have all risen more than 10 times, and a single-day increase of more than 30% has even become the norm. Among them, MARA announced again in December that it would purchase 80,000 Ant S19 and S19 Pro futures, which means that its total installed capacity in the future will exceed 103,000 units.

Although mining companies are wealthy and have strong expectations for making money at the current price of coins, if you dig deeper, you can see that the operating routines of these listed companies are almost identical, and it is not an exaggeration to say that they have a lot of dark history.

RIOT——A veteran in the last bull market

Riot Blockchain was originally named Venaxis, a biotechnology company that had made many attempts in the biological field, but its performance had not improved. Before getting involved in the blockchain business, its maximum revenue was only about 2 million US dollars, which came from royalties on intellectual property rights. Later, Venaxis acquired BiOptix, a drug development company, and changed the name of the listed company to BiOptix.

After another failed attempt at a new business in the biological field, the company appointed a new CEO. This CEO had no experience in the biotechnology field and specialized in investment and mergers and acquisitions. During the 2017 cryptocurrency bull market, the company launched a series of capital operations. First, it changed its name to Riot Blockchain, then changed its registered place to Nevada, which does not impose taxes on blockchain companies. At the same time, it also acquired a Canadian blockchain payment company and purchased a batch of cryptocurrency mining machines.

After this operation, Riot's stock price increased by more than 14 times in 2017 , reaching a peak of $46.2. However, in the following years, RIOT's stock price has been falling, with the maximum retracement exceeding 98%. Since entering the bull market in the second half of 2020, RIOT's stock price has exceeded $20 again, with a market value of more than $1.3 billion.

Because of the cutting of leeks, this stock was also criticized by foreign media in the last bull market: "How can a biotech stock double in less than three weeks and gain more than 500% in 90 days? Perhaps dog food manufacturer Kibbles and Bits can also change its name to Kibbles and Bitcoin, and tax preparation company H&R Block can also change its name to H&R Blockchain, so that its market value can jump by three digits."

MARA - A veteran player in a crazy business transformation

MARA was founded in 2010. At that time, the company was called American Strategic Minerals Corporation, focusing on uranium and vanadium exploration, but it did not achieve any results. Later, the company invested in California real estate in 2012. A year later, the real estate business was stopped again, and it transformed into the intellectual property licensing industry and changed its name to Marathon Paten Group. Inc. Later, in November 2017, the company tried to merge with cryptocurrency mining company Global Bit Venture and transformed into a cryptocurrency miner again.

During the stock market crash in March 2020, MARA once fell to a low of $0.35, with a market value of less than $30 million. However, just nine months later, it rose to a high of $16.77, with a market value of more than $1 billion. If the price of the coin continues to rise, it is expected that the MARA stock price will reach $35, which means that MARA may become a super bull stock with a hundred-fold increase in one year.

After MARA's crazy capital operation and purchase of mining machines, it may even become the largest miner in the United States this year. It will set up its own mining pool and also donate to Bitcoin developers. Overseas media generally compare this with Bitmain's cancellation of donations, and MARA's industry status continues to rise.

How to calculate the reasonable valuation of MARA

BTBT——Chinese cryptocurrency circle turns to US stocks

BTBT is a Chinese concept stock founded in 2015. It was previously called Dianniu Finance and once claimed to be "China's No. 1 auto loan stock". Its business scope includes: providing loans to borrowers with cars as collateral, auto financing leasing, etc. The cleansing and rectification of the P2P industry in the past two years has caused Dianniu Finance's net losses to continue to expand. In 2019, the company was investigated for suspected illegal fundraising.

In September 2020, Dianniu Finance was acquired for $10 and then focused on Bitcoin mining. The operator behind the scenes was Yuhong, a KOL in the domestic cryptocurrency circle. Since October 2020, BTBT has risen from its lowest point of $3.56 after the acquisition to $33, a nearly 10-fold increase, exceeding the increase in Bitcoin during the same period.

However, BTBT has recently been shorted by short-selling institutions and collectively sued by investors. Although the stock price has not been greatly affected, BTBT announced on February 3 that the chairman of the board, CEO and CSO (Yuhong) have resigned and will hire several American legal advisers as senior executives, presumably in response to this incident.

It can be seen that whether it is RIOT, MARA or BTBT, these stocks are strongly correlated with BTC prices, and their business revenue and profits also come from Bitcoin mining. If it is just because they are linked to the bull and bear markets of the cryptocurrency market, such stocks seem to be understandable no matter what form they take, but the risk for retail investors is still very high.

In addition, although Bitcoin cannot be completely anonymous, it is very concealable. The number of mining machines owned by listed companies can be audited, but ordinary investors have no way of knowing how many coins they actually mined and at what average price they were sold and converted into US dollars. After searching the entire Internet, I have not seen these companies publish their coin storage addresses , so the time and amount of coin transfer and cashing out are even more unknown. There may be a potential performance thunderbolt point in the future.

For example, such companies can take advantage of the market's heat and continuously release announcements saying how many new machines the company has purchased, how much computing power it has, and how much Bitcoin income it has each month. While releasing positive news, the stock price will surge 10 times, 20 times, or even 30 times. The management can then take the opportunity to cash out at a high level.

After the bear market came, the company could have issued another announcement saying that it suffered losses because it bought mining machines at high prices and sold coins at low prices. After searching the entire Internet, I have never seen the company publish its own coin storage address, so there is no way to know the time and amount of coin transfer and cash out.

In addition to the three small-cap stocks listed on the Nasdaq mentioned above, there is also a company called BITFY traded on the pink sheet market, which has also adopted the routine of transforming into cryptocurrency mining and then cutting leeks. The company was formerly known as Natural Resource Holdings Limited, and its main business is the exploration of iron, gold, silver, zinc and lead mines in Canada and the United States. The company transformed into a blockchain mining business through a name change + reverse merger. After the company completed the merger and acquisition transaction in April 2018, the cryptocurrency market immediately fell into a bear market, and the stock price fell from a high of US$15.10 to a low of US$2.56, and has now stopped trading.

Influenced by these three Bitcoin mining companies, a large number of "failed" Chinese concept stocks are also filling in Bitcoin mining assets, such as 500.com lottery website, the old game company Jiucheng, SOS, which is engaged in loan transformation, and the latest China Global Shipping. This is just the beginning. Shenma, Bitmain and others will go public in the future. They are the top players in the mining industry, and their market value may be very amazing. Reference exclusive: Shenma Mining Machine prepares for US stock listing. China's crypto mining industry may usher in a wave of listings

However, we should also realize that there may be two major risks for "name-changing stocks" whose main business has taken a big turn:

1. Cross-industry transformation means that the ability or intention of the company's management is questionable;

2. Entering new areas with regulatory risks, the company's operations are cyclical and investment uncertainty increases.

However, for high-risk targets, the room for profit speculation is naturally huge. Investors need to do a good job of risk control and grasp the points of stop-profit and stop-loss. (Head picture from Coin Delite)