Thoughts on CLSK
TL;DR: In the short term, I have no clue where CLSK goes from here. The confluence of factors (CLSK competent management, spot BTC ETF performance, MARA price action in previous cycles) makes me very comfy in CLSK. So long as BTC trades higher, CLSK will be much much higher.
We are 5 weeks out from the halving event (which results in a 50% reduction in BTC inflation)
Since Feb 27, BTC price has been up about 30% and CLSK price is down 30%
Starting to see lots of DMs/replies in the form of “What are your thoughts on CLSK?”
So the question now stands - how much lower will CLSK go? Do we think the halving (miner revenue reduction) is priced in?
In the short term, I have no strong view on where BTC goes from here - feels like we are due for a larger correction given prior cycles, but then again with the ETF in play it is hard to say
In the case where BTC nukes, it is highly likely that CLSK will nuke more (it will also be a huge sign if it doesn’t) - I’ve previously mentioned that miners trade very similarly to deep OTM call options on BTC
However, with the 30% correction while BTC has run 30%, I’m starting to lean towards the halving (revenue reduction) being more priced in than not at this point
CLSK shelf offering (permission to issue additional shares) already was done in Jan, they’ve pre-ordered enough miners that should take them to 25 terahash and also purchased a call option to take them to 50 terahash by the EOY (if/when BTC flies I don’t think this is priced in at all)
Their hashrate grew 60% in Feb and you can see this in the number of BTC they are mining daily (over the last 30 days they’ve cleared 24.92 avg daily vs. 18.75 per day in Jan)
Management financial incentives are all price based (as opposed to marketcap and/or terahash) - this aligns incentives and prevents them from diluting aggressively + taking on a lot of debt
Despite mining 648 BTC in Feb, CLSK only sold 2.8 (makes me believe in the management even more)
I’ve been saying CLSK is the best miner since Nov of last year, and still believe it. The fact that they’ve bought a call option for an additional 25 EH/s (more than 2x where they are currently) was a great decision (and I know it’s gone unnoticed). Their incentives are also aligned with ours as shareholders (they get paid more once CLSK share price hits certain milestones)
Additionally, what gives me more faith is looking at how MARA (the best performing miner of last cycle) did pre and post halving:
In Aug ‘20 their price tanked 70% post halving while BTC was ranging (they diluted A LOT of their stock)
Even if you had bought before the 70% drawdown, you would still be over 10x by Feb ‘21 once BTC touched 50K. The market cap of MARA went up 35x over the course of 6 months while BTC went up 4x
So why is it the case that these miners have so much volatility both ways? It comes back to why I view miners as call options on BTC -- once the overhead costs of dilution, halving, and management selling have been priced in, every $ increase in the BTC price means exponentially more $ to miners as a business (look at gamma/delta on call options and how they affect option values when the underlying price goes up/down).
Beyond fundamentals, as always, things will get crazy – when we got 50K BTC back in Feb ‘21, everyone was calling for 100K. A similar level of exuberance will take place this time around and that will spill over to demand for miners.
The confluence of factors (CLSK competent management, spot BTC ETF performance, MARA price action in previous cycles) makes me very comfy in CLSK. I still have my spot from Nov ‘23 and have slowly started re-buying some shorter dated options (on dips) for when we get the series of +10% consecutive days (so long as BTC continues to rip, of course)
As always, NFA DYOR