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On Wednesday, Bernstein analysts discussed the emerging significance of Bitcoin and decentralized technologies in a world that is moving towards deglobalization. They identified these technologies as rapidly becoming an alternative global settlement layer, which could reshape how nation-states and institutions approach value storage and transactions. According to InvestingPro data, this transformation is already reflecting in the financials of crypto-focused companies, with many showing remarkable growth trajectories and evolving business models.
Gautam Chhugani, a Bernstein analyst, noted the shift in perspective on decentralized technologies amid changing global trade rules. The firm has been covering the technology behind decentralized ledgers for over four years, recognizing the challenges investors have faced in understanding the need for such systems. However, as the U.S. and other nations reconsider the rules of trade, decentralized technologies are gaining traction as potential sources of resilience and neutrality in global trust.
Bernstein anticipates that nation-states may start to view Bitcoin as an alternative "store of value" reserve, alongside traditional assets like Gold and U.S. Treasuries. They argue that Bitcoin offers unique advantages, such as not being controlled by any single nation-state, having no counter-party risk, and being a digital asset that is easy to move across borders. Moreover, its liquidity and 24/7 global trading, with daily volumes between $40-50 billion, make it a compelling option.
In addition to Bitcoin, Bernstein highlights the role of decentralized blockchains as a new global cross-border settlement layer. These blockchains facilitate trust and permission-less settlements without central authority or censorship. Leading blockchains like Ethereum and Solana have already settled trillions in value annually, proving the business case for decentralized financial markets.
Tokenization, stablecoins, and central bank digital currencies (CBDCs) are also seen as the new value layer on decentralized blockchains. With tokenization currently led by USD-based stablecoins, Bernstein suggests that future economic blocs might align with specific stablecoins or CBDCs. They foresee increased use of stablecoins in global B2B payments, cross-border remittances, and inter-bank settlements, as well as financial institutions adopting tokenization for real-world assets.
Bernstein maintains an 'Outperform' rating on crypto equities as proxies for Bitcoin and crypto exposure, including companies like HOOD (NASDAQ:HOOD), COIN, MSTR, RIOT, CLSK, IREN, and CORZ. These companies are expected to benefit from the acceleration of decentralized technologies as foundational elements of the global financial landscape. Looking at IREN specifically, InvestingPro data reveals impressive revenue growth of 133% in the last twelve months, with exceptional gross profit margins of 90%. While currently unprofitable, analysts expect the company to turn profitable this year. InvestingPro Tips indicate the company holds more cash than debt, though it's currently burning through cash rapidly. For deeper insights into IREN and other crypto-focused companies, including comprehensive Pro Research Reports covering 1,400+ US equities, consider exploring InvestingPro's advanced analytics platform.
In other recent news, IREN Limited announced significant operational advancements, including an increase in data center capacity to 660 megawatts and a boost in Bitcoin mining capacity to 37 exahashes per second, with plans to reach 50 EH/s in early 2025. The company reported a Bitcoin mining revenue of $45.3 million for March, with a hardware profit margin of 76%, and AI Cloud Services revenue of $1.6 million, showing a 33% month-over-month growth. IREN is pausing its Bitcoin mining expansion at 52 EH/s to focus on AI Cloud Services and AI Data Center businesses, securing an additional 600MW grid connection, bringing its total to 2.75 gigawatts in West Texas. Additionally, IREN is restating its financial statements to reclassify Bitcoin sales proceeds from operating to investing activities, aligning with international accounting standards. The company has also secured a significant development portfolio with 2,910MW of grid-connected power across North America. IREN's strategic shift includes engaging with global AI firms to align its infrastructure with market demand, supported by a mix of customer prepayments and debt financing solutions. Daniel Roberts, Co-Founder and Co-CEO, emphasized that the new 600MW grid connection minimizes development risk and guarantees deliverable capacity. Finally, IREN's forward-looking statements highlight plans to expand its Bitcoin mining capacity and data center operations using 100% renewable energy.
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