An Undervalued Bitcoin Stock To Watch Amid Market Turmoil
The cryptocurrency mining machine maker missed a market boom last year, and is ramping up its own bitcoin production just as the sector shows signs of stumbling
Key Takeaways:
- Canaan boosted its bitcoin production by about 10% in March from February after a bitcoin “halving” event last year dampened demand for its mining machines
- The company’s stepped-up mining efforts come as the crypto market enters a new phase of uncertainty created by recent U.S. protectionist policies
It’s named for the biblical Promised Land, but Canaan Inc. (CAN.US) seems stuck far from paradise these days, even as the crypto market around it boomed last year. The cryptocurrency mining machine maker’s fortunes are typically tied to changes in digital asset values, with strong markets typically boosting demand for its products.
But the company failed to benefit much from a crypto bull run last year because the rally was largely fueled by a “halving” event for bitcoin. That mechanism is built into the algorithm that creates new bitcoins, and reduces the number of new bitcoins being created by half, making it more difficult for miners to make profits and hence dampening demand for new mining machines. That reality was reflected by Canaan’s continued large losses last year, even as crypto prices soared.
To diversify beyond its reliance on machine sales, Canaan has been building its own mining operations to capitalize directly on gains in bitcoin prices, and is making some extra money through those efforts. That newer business is growing, as shown by the company’s latest monthly report published last week. But self-mining comes with the same headaches now being faced by all miners trying to cash in on the recent crypto craze.
After booming last year, as bitcoin briefly touched the $100,000 mark, cryptocurrencies are on shakier footing again as Donald Trump’s tariffs threaten to plunge the global economy into recession. Bitcoin is just coming out of its worst first-quarter performance in …
About The Author
