$CLSK Flying Under the Radar
CleanSpark, Inc. (Nasdaq: CLSK) is one of the fastest-growing public Bitcoin miners in North America that gained wide interest from investors thanks to its operational efficiency. Over the last 5 months, the company increased its hash rate by nearly 50%, positioning itself to reach its planned capacity of 16 EH/s by the end of the year. With 2 major Bitcoin catalysts approaching in the first half of 2024, the company’s expansion comes at a perfect timing to capitalize on those catalysts which are the anticipated SEC approval of the first spot Bitcoin ETF and the Bitcoin halving. Given that the company appears to be trading at a discount compared to other major Bitcoin miners based on its P/S ratio and P/B ratio, CLSK stock could be one of the best Bitcoin miners to invest in ahead of the upcoming Bitcoin tailwinds.
CLSK Fundamentals
Bitcoin Catalysts
By January 10, 2024, the SEC is set to make a decision regarding Ark Invest’s spot Bitcoin ETF application which would be a major catalyst for the cryptocurrency. A spot Bitcoin ETF would function similarly to other ETFs in that it would be regulated by the SEC and subject to strict reporting requirements. This would provide investors with a level of transparency and oversight that is often lacking in the cryptocurrency market. Not only that but a spot Bitcoin ETF would bring institutional-grade custody solutions, reducing the risk of theft or loss of Bitcoin.
As such, the SEC approving a spot Bitcoin ETF could have positive implications for the broader cryptocurrency market. The most significant result of the approval of a spot Bitcoin ETF is that it could open substantial pools of capital to the Bitcoin market. In addition, it could signal a greater acceptance and recognition of Bitcoin by regulatory authorities, potentially leading to increased adoption and mainstream integration of Bitcoin. Given this expected surge in demand for the cryptocurrency, Bitcoin’s price may increase substantially in case the SEC approves Ark Invest’s application.
With that in mind, the SEC has so far resisted approving spot Bitcoin ETFs, citing risks such as fraud and market manipulation. However, this stance may change given the commission’s decision not to appeal an August court ruling that may pave the way for the $18.4 billion Grayscale Bitcoin Trust (OTC: GBTC) to convert to an ETF.
This has led Bloomberg Intelligence analysts to say that “approval of a spot Bitcoin ETF looks inevitable” and that several funds are likely to be given the green light, although the exact timing remains uncertain. In fact, several analysts believe that there is a 75% chance the SEC will approve the first spot Bitcoin ETF by the end of 2023, in light of Grayscale’s victory against the commission.
As the likelihood of a spot Bitcoin ETF being approved appears to be higher than ever, this would coincide with the biggest catalyst for Bitcoin. The Bitcoin halving. Bitcoin halving is a key event in the world of crypto and is expected to occur in April 2024. The significance of this event is that Bitcoin prices have historically surged in the year prior to and post each of the previous 3 halvings.
First Halving
The first Bitcoin halving occurred in November 2012, and in the year prior to the event, Bitcoin surged by as much as 595.7%, reaching a then-all-time high of $16. That said, the bigger movement occurred in the year following the event as Bitcoin climbed a staggering 9413.16%, also reaching a then-all-time high of $1165.
Second Halving
This trend continued prior to the second halving that occurred in July 2016 as Bitcoin prices increased by as much as 248.86% in the year prior to the event. Following the event, Bitcoin went on to record a massive 2948.38% run where it reached a then-all-time high of nearly $20 thousand in December 2017.
Third Halving
The third halving occurred in May 2020 and Bitcoin prices followed the same trend as Bitcoin surged by as much as 314% in the year prior to the halving, before reaching its all-time high of $69 thousand in the year following the event in November 2021.
The price performance has been rather identical before and after the last three halvings based on the charts. Therefore, we can use this historical data to predict the same trend to occur in the upcoming halving event. As is, Bitcoin is up more than 110% on a YTD basis which is in line with the usual run in the year prior to the halving.
In this way, there is a strong possibility Bitcoin will reach a new all-time high in 2025 based on the historical trend which shows that the cryptocurrency reaches a new all-time high in the year after the halving.
Profitability Post Halving?
Considering the potential increase in Bitcoin prices over the next 2 years, CLSK’s expansion could not have come at a better time. While Bitcoin mining profitability declined by 44% over the last year, the company continued to increase production which could have extremely positive implications for the company’s Bitcoin stash in the future.
Not only did CLSK continue increasing production but it is also actively working to increase its hashrate which allows it to mine more Bitcoin. On June 1st, the company purchased 12,500 new Antminer S19 XP units for $40.5 million, effectively increasing its hash rate of 6.7 EH/s by 1.76 EH/s. This purchase positions the miner to meet and potentially exceed its year-end target of 16 EH/s, per CEO Zach Bradford.
CLSK also purchased 4.4 EH/s of Antminer S21 bitcoin mining machines, which are scheduled to be delivered in early 2024, which will increase its hash rate to more than 20 EH/s once plugged in. To put this into perspective, industry leader Marathon Digital Holdings, Inc. (Nasdaq: MARA) has an installed hash rate of 23.1 EH/s, while another industry leader Riot Platforms, Inc. (Nasdaq: RIOT) expects to reach a hash rate of 20.01 EH/s in mid-2024.
In tandem with increasing its hash rate, CLSK is also effectively working to keep its energy and maintenance costs low, mainly due to its location in Georgia where electricity prices are low. This is critical for Bitcoin miners as keeping their business profitable is very much about increasing hash rate and keeping facility costs like energy and maintenance down. Therefore, CLSK’s location and ongoing expansion may help it become profitable if Bitcoin prices increase as expected due to the aforementioned catalysts.
With that in mind, CLSK’s cost per mined Bitcoin of $14.3 thousand is among the best in the industry. For context, MARA’s – the industry leader in terms of production – cost per mined Bitcoin is high at nearly $19 thousand. Meanwhile, RIOT’s – the industry leader in terms of cost management – cost per mined Bitcoin is $13.4 thousand. With production expected to be near the levels of MARA in early 2024 while managing its costs in a similar fashion to RIOT, CLSK combines the advantages of both industry leaders which could make it a viable investment in the Bitcoin mining sector.
Valuation
In terms of its valuation, CLSK stock appears to be undervalued compared to MARA and RIOT. Looking into each company’s forward P/S ratio, CLSK is trading at 4x its 2023 sales, while MARA and RIOT are trading at 5.43x and & 7.32x, respectively. If we look at each company’s 2024 forward P/S, CLSK appears to be more undervalued as it is trading at 1.82x its 2024 sales, while MARA and RIOT are trading at 4.07x and 4.65x, respectively.
Given the growth potential of the Bitcoin mining industry due to the anticipated impact of the upcoming halving on Bitcoin prices, these sales multiples may not indicate that MARA and RIOT are overvalued. Instead, it could be viewed that the market is discounting CLSK’s growth potential despite its ongoing expansion that will bring its production closer to MARA while managing its costs at comparable levels to RIOT.
Not only does CLSK appear to be undervalued based on its forward P/S ratio but it could also be considered undervalued based on its P/B ratio. Looking at the table below, we can find that CLSK’s P/B ratio is 1.13, less than MARA’s 2.69 and RIOT’s 1.7. Given that the average P/B ratio of both industry leaders is 2.19, we can reach a price target of $8.68 for CLSK stock, implying a 95% upside from current levels.
CLSK MARA RIOT
Total Assets $652,803,000 $1,373,237,000 $1,358,930,000
Total Liabilities $49,155,000 $762,991,000 $118,020,000
Book Value $603,648,000 $610,246,000 $1,240,910,000
OS 152,643,328 174,266,313 185,305,831
BVPS $3.95 $3.50 $6.70
Share Price $4.45 $9.41 $11.39
P/B Ratio 1.13 2.69 1.70
Risks
While CLSK stock may be a good investment in the Bitcoin mining sector, there are risks that investors should consider first. First, the main catalyst for all Bitcoin miners is the expected increase in Bitcoin prices following the halving. That said, it is not guaranteed that Bitcoin will increase in a similar fashion to the previous 3 halvings as the current macro environment is vastly different from the last 3 halving events.
Another risk to consider is that the SEC’s decision not to appeal the court ruling in Grayscale’s lawsuit may be seen as a change in the commission’s stance toward cryptocurrencies, it is still not guaranteed that a spot Bitcoin ETF will be approved. As such, the expected surge in demand for Bitcoin may not materialize which will keep the cryptocurrency’s prices suppressed.
CLSK also has a long history of diluting its shareholders which is a critical risk to consider before investing in the stock. As is, the company’s OS nearly tripled from 41.4 million in Q1 2022 to more than 152.6 million in Q3 2023.
Technical Analysis
CLSK stock is in a bearish trend with the stock in a downward channel since reaching its 52-week high in July. Looking at the indicators, the stock is above the 200, 50, and 21 MAs which is a bullish sign. While the RSI is neutral at 53, the MACD is approaching a bearish crossover, which could see the stock retest one of its MA supports unless a strong upward movement in Bitcoin’s price occurs.
As for the fundamentals, CLSK may be one of the best Bitcoin mining stocks to own for investors bullish on the sector thanks to its ongoing expansion that will bring its hash rate near MARA’s while maintaining efficient cost management similar to that of RIOT. Given that the stock is likely undervalued when looking at its forward P/S and P/B ratios, investors could find retests of key supports ideal entries for a long position.
CLSK Fundamentals
In conclusion, CLSK stock appears to be well-positioned to benefit greatly from the upcoming Bitcoin catalysts which are the SEC’s possible approval of the first spot Bitcoin ETF and April’s Bitcoin halving. Given these catalysts’ potential positive impact on Bitcoin prices, the company’s ongoing expansion may bear fruit if the cryptocurrency’s price increases as anticipated since it would be able to mine more Bitcoin. When combined with its solid cost management, the company has a clear path toward profitability if Bitcoin prices follow the trend of reaching a new all-time high in the year following the halving. With the stock trading at a discount compared to its peers MARA and RIOT based on its forward P/S and P/B ratios, CLSK stock may be an opportunity to gain exposure to Bitcoin prices as its performance could allow it to reach the $8.68 price target.
CLSK Fundamentals
Bitcoin Catalysts
By January 10, 2024, the SEC is set to make a decision regarding Ark Invest’s spot Bitcoin ETF application which would be a major catalyst for the cryptocurrency. A spot Bitcoin ETF would function similarly to other ETFs in that it would be regulated by the SEC and subject to strict reporting requirements. This would provide investors with a level of transparency and oversight that is often lacking in the cryptocurrency market. Not only that but a spot Bitcoin ETF would bring institutional-grade custody solutions, reducing the risk of theft or loss of Bitcoin.
As such, the SEC approving a spot Bitcoin ETF could have positive implications for the broader cryptocurrency market. The most significant result of the approval of a spot Bitcoin ETF is that it could open substantial pools of capital to the Bitcoin market. In addition, it could signal a greater acceptance and recognition of Bitcoin by regulatory authorities, potentially leading to increased adoption and mainstream integration of Bitcoin. Given this expected surge in demand for the cryptocurrency, Bitcoin’s price may increase substantially in case the SEC approves Ark Invest’s application.
With that in mind, the SEC has so far resisted approving spot Bitcoin ETFs, citing risks such as fraud and market manipulation. However, this stance may change given the commission’s decision not to appeal an August court ruling that may pave the way for the $18.4 billion Grayscale Bitcoin Trust (OTC: GBTC) to convert to an ETF.
This has led Bloomberg Intelligence analysts to say that “approval of a spot Bitcoin ETF looks inevitable” and that several funds are likely to be given the green light, although the exact timing remains uncertain. In fact, several analysts believe that there is a 75% chance the SEC will approve the first spot Bitcoin ETF by the end of 2023, in light of Grayscale’s victory against the commission.
As the likelihood of a spot Bitcoin ETF being approved appears to be higher than ever, this would coincide with the biggest catalyst for Bitcoin. The Bitcoin halving. Bitcoin halving is a key event in the world of crypto and is expected to occur in April 2024. The significance of this event is that Bitcoin prices have historically surged in the year prior to and post each of the previous 3 halvings.
First Halving
The first Bitcoin halving occurred in November 2012, and in the year prior to the event, Bitcoin surged by as much as 595.7%, reaching a then-all-time high of $16. That said, the bigger movement occurred in the year following the event as Bitcoin climbed a staggering 9413.16%, also reaching a then-all-time high of $1165.
Second Halving
This trend continued prior to the second halving that occurred in July 2016 as Bitcoin prices increased by as much as 248.86% in the year prior to the event. Following the event, Bitcoin went on to record a massive 2948.38% run where it reached a then-all-time high of nearly $20 thousand in December 2017.
Third Halving
The third halving occurred in May 2020 and Bitcoin prices followed the same trend as Bitcoin surged by as much as 314% in the year prior to the halving, before reaching its all-time high of $69 thousand in the year following the event in November 2021.
The price performance has been rather identical before and after the last three halvings based on the charts. Therefore, we can use this historical data to predict the same trend to occur in the upcoming halving event. As is, Bitcoin is up more than 110% on a YTD basis which is in line with the usual run in the year prior to the halving.
In this way, there is a strong possibility Bitcoin will reach a new all-time high in 2025 based on the historical trend which shows that the cryptocurrency reaches a new all-time high in the year after the halving.
Profitability Post Halving?
Considering the potential increase in Bitcoin prices over the next 2 years, CLSK’s expansion could not have come at a better time. While Bitcoin mining profitability declined by 44% over the last year, the company continued to increase production which could have extremely positive implications for the company’s Bitcoin stash in the future.
Not only did CLSK continue increasing production but it is also actively working to increase its hashrate which allows it to mine more Bitcoin. On June 1st, the company purchased 12,500 new Antminer S19 XP units for $40.5 million, effectively increasing its hash rate of 6.7 EH/s by 1.76 EH/s. This purchase positions the miner to meet and potentially exceed its year-end target of 16 EH/s, per CEO Zach Bradford.
CLSK also purchased 4.4 EH/s of Antminer S21 bitcoin mining machines, which are scheduled to be delivered in early 2024, which will increase its hash rate to more than 20 EH/s once plugged in. To put this into perspective, industry leader Marathon Digital Holdings, Inc. (Nasdaq: MARA) has an installed hash rate of 23.1 EH/s, while another industry leader Riot Platforms, Inc. (Nasdaq: RIOT) expects to reach a hash rate of 20.01 EH/s in mid-2024.
In tandem with increasing its hash rate, CLSK is also effectively working to keep its energy and maintenance costs low, mainly due to its location in Georgia where electricity prices are low. This is critical for Bitcoin miners as keeping their business profitable is very much about increasing hash rate and keeping facility costs like energy and maintenance down. Therefore, CLSK’s location and ongoing expansion may help it become profitable if Bitcoin prices increase as expected due to the aforementioned catalysts.
With that in mind, CLSK’s cost per mined Bitcoin of $14.3 thousand is among the best in the industry. For context, MARA’s – the industry leader in terms of production – cost per mined Bitcoin is high at nearly $19 thousand. Meanwhile, RIOT’s – the industry leader in terms of cost management – cost per mined Bitcoin is $13.4 thousand. With production expected to be near the levels of MARA in early 2024 while managing its costs in a similar fashion to RIOT, CLSK combines the advantages of both industry leaders which could make it a viable investment in the Bitcoin mining sector.
Valuation
In terms of its valuation, CLSK stock appears to be undervalued compared to MARA and RIOT. Looking into each company’s forward P/S ratio, CLSK is trading at 4x its 2023 sales, while MARA and RIOT are trading at 5.43x and & 7.32x, respectively. If we look at each company’s 2024 forward P/S, CLSK appears to be more undervalued as it is trading at 1.82x its 2024 sales, while MARA and RIOT are trading at 4.07x and 4.65x, respectively.
Given the growth potential of the Bitcoin mining industry due to the anticipated impact of the upcoming halving on Bitcoin prices, these sales multiples may not indicate that MARA and RIOT are overvalued. Instead, it could be viewed that the market is discounting CLSK’s growth potential despite its ongoing expansion that will bring its production closer to MARA while managing its costs at comparable levels to RIOT.
Not only does CLSK appear to be undervalued based on its forward P/S ratio but it could also be considered undervalued based on its P/B ratio. Looking at the table below, we can find that CLSK’s P/B ratio is 1.13, less than MARA’s 2.69 and RIOT’s 1.7. Given that the average P/B ratio of both industry leaders is 2.19, we can reach a price target of $8.68 for CLSK stock, implying a 95% upside from current levels.
CLSK MARA RIOT
Total Assets $652,803,000 $1,373,237,000 $1,358,930,000
Total Liabilities $49,155,000 $762,991,000 $118,020,000
Book Value $603,648,000 $610,246,000 $1,240,910,000
OS 152,643,328 174,266,313 185,305,831
BVPS $3.95 $3.50 $6.70
Share Price $4.45 $9.41 $11.39
P/B Ratio 1.13 2.69 1.70
Risks
While CLSK stock may be a good investment in the Bitcoin mining sector, there are risks that investors should consider first. First, the main catalyst for all Bitcoin miners is the expected increase in Bitcoin prices following the halving. That said, it is not guaranteed that Bitcoin will increase in a similar fashion to the previous 3 halvings as the current macro environment is vastly different from the last 3 halving events.
Another risk to consider is that the SEC’s decision not to appeal the court ruling in Grayscale’s lawsuit may be seen as a change in the commission’s stance toward cryptocurrencies, it is still not guaranteed that a spot Bitcoin ETF will be approved. As such, the expected surge in demand for Bitcoin may not materialize which will keep the cryptocurrency’s prices suppressed.
CLSK also has a long history of diluting its shareholders which is a critical risk to consider before investing in the stock. As is, the company’s OS nearly tripled from 41.4 million in Q1 2022 to more than 152.6 million in Q3 2023.
Technical Analysis
CLSK stock is in a bearish trend with the stock in a downward channel since reaching its 52-week high in July. Looking at the indicators, the stock is above the 200, 50, and 21 MAs which is a bullish sign. While the RSI is neutral at 53, the MACD is approaching a bearish crossover, which could see the stock retest one of its MA supports unless a strong upward movement in Bitcoin’s price occurs.
As for the fundamentals, CLSK may be one of the best Bitcoin mining stocks to own for investors bullish on the sector thanks to its ongoing expansion that will bring its hash rate near MARA’s while maintaining efficient cost management similar to that of RIOT. Given that the stock is likely undervalued when looking at its forward P/S and P/B ratios, investors could find retests of key supports ideal entries for a long position.
CLSK Fundamentals
In conclusion, CLSK stock appears to be well-positioned to benefit greatly from the upcoming Bitcoin catalysts which are the SEC’s possible approval of the first spot Bitcoin ETF and April’s Bitcoin halving. Given these catalysts’ potential positive impact on Bitcoin prices, the company’s ongoing expansion may bear fruit if the cryptocurrency’s price increases as anticipated since it would be able to mine more Bitcoin. When combined with its solid cost management, the company has a clear path toward profitability if Bitcoin prices follow the trend of reaching a new all-time high in the year following the halving. With the stock trading at a discount compared to its peers MARA and RIOT based on its forward P/S and P/B ratios, CLSK stock may be an opportunity to gain exposure to Bitcoin prices as its performance could allow it to reach the $8.68 price target.
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