Two years after the pandemic erupted, the world faces yet another crisis. The ongoing conflict in Ukraine has the potential to spill over. That would have devastating consequences on the global economy.
We’re already seeing an impact. The price of gold, oil, and wheat have all skyrocketed. Inflation expectations have been raised. That means most stocks that aren’t essential now face some downside risk. However, one asset seems to be performing better than expected: Bitcoin (CRYPTO: BTC).
Here’s why the digital commodity is rising during this volatile time and the best way to bet on the trend.
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Why is Bitcoin surging?
Bitcoin is currently trading at $55,100. That’s 16% higher than last week, when Russia commenced its invasion. Experts believe this surge could be driven by two factors: sanctions and fundraising.
Sanctions on ordinary Russians over the past week have cut them off from the traditional economy. The Russian ruble has dropped significantly as a result. Citizens of Russia, many of whom are against the war, may have turned to digital assets like Bitcoin to circumvent sanctions. About 12% of Russia’s population already had exposure to crypto before the crisis, so this flight to safety isn’t beyond the realm of possibility.
Note that the Ukrainian armed forces are also using Bitcoin to raise funds. So far, they’ve raised roughly US$52 million (CA$65.7 million) in crypto donations. These activities could be part of the reason for Bitcoin’s surge.
While the price of BTC ascends, crypto mining stocks are still trading far below their all-time highs. This could create an opportunity for investors.
Bet on Bitcoin mining
HIVE Blockchain Technologies (TSX: HIVE)(NASDAQ:HVBT) is still trading 56% below its all-time high. The company mines both Bitcoin and Ethereum (CRYPTO: ETH), which have surged over the past week and could retain their value throughout 2022.
Like other cryptocurrency-related companies, Hive Blockchain has paid a heavy price on investors shunning the sector in favour of safe bets earlier in the year. However, the rising value of crypto could expand HIVE’s already impressive gross margins.
If its performance in the past is anything to go by, then it is one of the companies that’s well positioned to bounce back once the price of Bitcoin resumes its uptrend. In its most recent quarter, HIVE reported a gross mining margin of 68%.
This margin could improve if BTC and ETH’s market value continues to climb. HIVE’s operations are also 100% renewable, so the rising cost of oil and gas shouldn’t impact it much.
In the third quarter, Hive Blockchain delivered revenue of $66.18 million, an improvement from $52.61 million in the second quarter. That implies a price-to-earnings multiple of five. The valuation, margins and momentum should make HIVE a reasonable bet for long-term investors.
Bottom line
Bitcoin has proven to be crisis-resistant. The digital token saw its value surge during the pandemic. Now, both sides in the Eastern European conflict are using it to raise funds or seek safety. As the price climbs, crypto miners like HIVE should see further upside. Keep an eye on this trend.
