Cryptocurrency mining is still a young industry and for the vast majority of time this has been an investment space, investors have associated these companies with cryptocurrency prices.
That's certainly true for many of the stocks that populate exchange-traded funds, such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO). Most of SATO's holdings are pure miners, many of whom mine bitcoins. As such, the actions of those companies are closely correlated with spot bitcoin prices. So goes the largest cryptocurrency, so goes miner share prices, and so goes SATO.
Those high correlations with bitcoin for SATO member firms when the digital currency is rising, but that's a two-way street. When Bitcoin fails, miners usually either do the same or overextend to the downside. That is, there are risks in owning bitcoin miners, but some of those risks can be mitigated by the companies themselves if they diversify their sources of income. It seems that some SATO holdings are learning lessons from the crypto winter of 2022 and doing just that.
SATO Holdings harnessing the power of computing
Crypto mining is a technology-intensive industry, which means that miners, including SATO components, have more technological competencies than investors realize. These include High Performance Computing, or HPC. The largest shareholding in SATO, Hut 8 Mining Corporation (HUT)is venturing into the field of HPC.
โcabin 8better known as a bitcoins mining company with facilities in Alberta, Canada and Texas, is a great example, he says. Thanks to its high-capacity computing infrastructure, Hut 8 recently signed a contract to provide HPC for clients in the Canadian healthcare sector.โ reported Darren Kleine for Blockworks.
Such forays are still in their early stages because while there are similarities between crypto mining and HPC, these activities are not identical twins and SATO components must make different upfront investments to deliver to HPC customers than when they spend to refine the mining operations.
In addition to the diversified income streams that SATO components can realize by pursuing businesses beyond mining, there are other potential benefits. Courtesy of Blockworks, Avi Felman, head of digital asset trading at GoldenTree, noted that as miners diversify their business models, they may not be forced to sell large amounts of bitcoin during bear markets, as was seen last month. last year. Put another way, miners could help spot bitcoin prices find alternative avenues to generate top-line growth.
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