O Bitcoin (CRYPTO: BTC) cryptocurrency has seen solid gains in the first half of 2024, starting with the introduction of spot bitcoin exchange traded funds (ETFs) in January. Bitcoin mining rewards were halved on April 19, hardly moving the cryptocurrency’s price immediately but setting the stage for another four-year boom-bust cycle. By the end of June, it had sailed to a solid 44.2% gain according to data from S&P Global Market Intelligence.

So there is Microstrategy MicroStrategy Corp. (NASDAQ: MSTR). The enterprise software company decided to ride the Bitcoin wave in the most amplified way four years ago. MicroStrategy’s balance sheet contained $7.5 billion in Bitcoin but only $81 million in cash as of the end of March. Mirroring Bitcoin’s rise with an extra shot of adrenaline, MicroStrategy has surged an incredible 118.1% in six months.

Meanwhile, most cryptocurrency miners did not share the same optimistic fate. The reward halving had an immediate effect on their bottom lines, and the top miners went in different directions. Digital Marathon Participations (NASDAQ: MARA) saw a price drop of 15.5%, while Riot platforms (NASDAQ: RIOT) has lost 40.9% of its market value. Highlighting the complex nature of today’s cryptocurrency market, Clean spark (NASDAQ: CLSK) managed to keep up with Bitcoin’s gains, pocketing a 44.6% return.

Bitcoin Price Chart

Same fundamental news, different market reactions

Why have these crypto-related investments gone in different directions? Their operations are quite different, and market makers are paying attention to these unique qualities.

Clean spark

CleanSpark acquired a total of 13 new mining facilities from other companies in the first half of the year, spanning the U.S. map from Georgia to Wyoming.

Additionally, the all-American Bitcoin mining company also crushed Wall Street’s consensus estimates in its February Q1 report and May Q2 update. The company turned a profit in both these earnings reports, both in terms of free cash flows and adjusted earnings per share.

With proven profitability, a debt-free balance sheet, $323 million in cash reserves, and a similar amount of Bitcoin holdings, CleanSpark appears poised to outperform the lower yields of this rewards halving cycle.

It’s no surprise to see this success story inspire rising stock prices.

Marathon

Marathon has experienced the same halving rewards as CleanSpark and has gone on its own production facility buying spree. The company currently has 31.5 exahashes per second (EH/s) of mining equipment installed, targeting the Bitcoin mining business. A much smaller fleet of machines with a capacity of 0.6 EH/s is mining the smaller Kaspa cryptocurrency instead, diversifying Marathon’s crypto operations a bit.

The story continues

The cryptocurrency miner is also exploring international production beyond its Texas facility, running a small test project in Finland and a power grid partnership in Kenya. Marathon consumes more cash than it generates, and its Bitcoin holdings outweigh its cash balance by a ratio of 4 to 1.

Investors see this as a riskier structure, making Marathon shares more vulnerable to economic challenges.

Riot platforms

Riot Platforms operates a smaller Bitcoin mining operation than either Marathon or CleanSpark. Its average production capacity stops at 11.4 EH/s, targeting 31 EH/s by the end of 2024. Both Marathon and CleanSpark are targeting 50 EH/s capacity by the same calendar milestone.

The company supplements its Bitcoin revenue with energy credits earned by slowing down or shutting down its mining operations when the Texas power grid needs a boost. The company is involved in an attempted stock-for-stock buyout of a smaller rival Bit Farms (NASDAQ: BITF), building a 14% equity stake while Bitfarms adopted a poison pill policy.

The acquisition is up in the air and investors generally hate uncertainty, so Riot Platforms’ stock performance isn’t impressing anyone in 2024.

Microstrategy

MicroStrategy is a different story. The company doesn’t operate any Bitcoin miners, so it doesn’t care much about the lower mining rewards.

Founder and CEO Michael Saylor’s company cares deeply about the price of Bitcoin, now and in the long term, as nearly all of its cash reserves have been converted into Bitcoin holdings. Furthermore, the company continues to buy more Bitcoin at every opportunity.

The purchases were funded by profits from MicroStrategy’s software business, additional stock sales, new debt and, in a short-lived test, even a loan secured by some of the company’s Bitcoin holdings. This coin-buying strategy amplifies Bitcoin’s gains when times are good, but it also exposes investors to more risk when Bitcoin prices are low.

Cryptocurrency is on the rise this year, so MicroStrategy’s stock price is benefiting from the cryptocurrency trend.

How Bitcoin Halving Boosts Cryptocurrency Mining Profits

Bitcoin’s mining reward halving makes it harder to run a profitable mining business — at least for a while. This hard-coded four-year cycle is designed to limit the supply of new coins while the cryptocurrency builds real-world demand.

The basic laws of supply and demand dictate rising prices in this scenario, and the Bitcoin price chart has shown this pattern in each of the first three halvings. History doesn’t repeat itself, but it often echoes familiar patterns, and the fourth reward halving cycle looks set to send Bitcoin prices much higher in the next year or so.

This predictable trend is the basis of Michael Saylor’s Bitcoin strategy. It also weeds out weaker hands from the costly Bitcoin mining industry when rewards are low and the price of Bitcoin has yet to begin its bull run. Riot’s attempted purchase of Bitfarms is an ambitious but risky effort to capitalize on the target company’s financial weakness before the cryptocurrency’s price rises again.

There is a clear lesson for investors in the early 2024 Bitcoin trends: understanding the cyclical nature of Bitcoin and the strategic moves of key industry players around it can provide a significant edge. Keep an eye on the players that thrive under pressure, as they are the ones likely to shine when the market recovers. The presence of spot Bitcoin ETFs should drive and support the current cycle, thanks to a large inflow of money from institutional investors.

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Anders Bylund has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Why Bitcoin and Cryptocurrency Stocks Soared or Fell in the First Half of 2024 was originally published by The Motley Fool

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