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Bitfarms: Is the Bull Run Sustainable?

Jack KelloggAvatar
Written by Jack Kellogg
Reviewed by Ellis Hobbs Fact-checked by Matt Monaco

Bitfarms Ltd.’s market rally, with shares trading up by 6.68 percent on Tuesday, is likely driven by positive sentiment from recent developments that have captured investor interest in the cryptocurrency mining sector.

Bitfarms Ltd.’s Strategic Moves

  • The company announces plans to sell a 200 MW mining site in Paraguay to Hive Digital for $85M, aiming to focus on its North America operations.
  • A partnership with expert consultants is set to develop high-performance computing and AI business across their North American sites.
  • Bitfarms operational hash rate significantly increased, boosting its daily BTC earnings despite a year-over-year decrease in BTC earnings per EH/s.
  • Keefe Bruyette & Woods initiated coverage on Bitfarms with an ‘Outperform’ rating and set a price target of CA$5.02, which has helped build positive momentum on the stock.
  • The acquisition of Stronghold Digital Mining is on track for closure in Q1 2025, promising expansion and diversification.

Candlestick Chart

Live Update At 14:32:07 EST: On Tuesday, February 04, 2025 Bitfarms Ltd. stock [NASDAQ: BITF] is trending up by 6.68%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick Overview of Financial Performance

As traders navigate the challenging landscapes of the financial markets, emotions often play a significant role in decision-making. It’s easy to get caught up in the excitement and fear of missing out on lucrative opportunities. As millionaire penny stock trader and teacher Tim Sykes says, “There is always another play around the corner; don’t chase just because you feel FOMO.” Keeping a level head and remembering that there will always be future possibilities can help traders maintain discipline and make more rational choices.

The recent stock movements have been rather interesting, though you might wonder why Bitfarms Ltd.’s shares seem to be on a rollercoaster ride. Financial metrics reveal some telling insights. First, looking at profitability, they currently have negative profit margins. The EBIT margin is at a worrying negative 66.9%, and the profit margin stands firmly in the red at about -69.2%. Though concerning, these figures should be noted within the context of ongoing strategic deals and operational changes planned by the company.

The balance sheet does show some positive strength signs; Bitfarms Ltd. has a current ratio of 3.7 and a total debt-to-equity ratio of 0.05. This suggests that in the short term, the company remains largely liquid enough to cover its obligations. However, red flags remain as they have a negative free cash flow, a sign of cash leakage continuing.

More Breaking News

From recent financial reports, they recorded revenue of approximately $146M, a substantial bump from previous years. Yet this improvement does not yet reflect operational profitability.

Exploring the Digital Strategy

Bitfarms’ strategic maneuvers offer a beacon of hope amid these murky financial metrics. The planned sale of the Paraguay site, valued at about $85M, exemplifies this. By reinvesting proceeds into the U.S. growth, including a 1 GW pipeline for BTC and HPC/AI ventures, Bitfarms anticipates cutting average power costs by 10% — a big win in any energy-intensive industry.

Equally, collaborating with adept consultants to expand its high-performance computing and AI capabilities indicates an agile pivot from solely relying on crypto assets. This could attract new investors and open more revenue streams for the company. The synergy from partnering with recognized names like the Appleby Strategy Group only strengthens this move.

A noteworthy detail, though, is the acquisition of Stronghold Digital Mining, poised to close in the first quarter of 2025. It broadens the company’s market share and embeds a diverse asset base. Imagine a chess game, where each strategic move aligns to outmaneuver the opponent and anticipate future plays.

The Road Ahead for Bitfarms:

Bitfarms has navigated a winding road with its stock price witnessing fluctuations. The combination of operational hash rate surge and expert endorsements like Keefe Bruyette & Woods’ outperform rating has brought a positive tilt to its market presence. Nonetheless, they are yet to convert swelling revenues into sustainable earnings, a critical gap to bridge moving forward.

However, it’s the blend of anticipated cost reductions, a promising tech pivot, and strengthening strategic partnerships that ground their growth optimism. Yet the looming uncertainties posed by continued negative margins and cash flow shortfalls could spell tricky waters ahead.

The stock’s recent venture into varying price ranges reflects both trader anticipation and caution. While ‘growth’ is a possible narrative given their expansion and strategic thrusts, the shadow of ‘bubble’ looms, largely based on internal financial health matters. As millionaire penny stock trader and teacher Tim Sykes says, “Small gains add up over time; focus on building wealth gradually, not chasing jackpots.” This mindset may help those trading with Bitfarms find a balanced approach amid the volatility.

Navigating these avenues requires interpreting financial reports with an eye on both potential opportunities and risks involved. Traders must decide if the rewards with Bitfarms outweigh its inherent risks. The digital odyssey has begun for Bitfarms, its course distinctly set on innovation and strategic prowess — and traders must watch if it sustains its momentum or dwindles from the pressure of underlying financial distress.

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”