Summary Hut 8 Corp.'s new venture with Eric Trump aims to boost its Bitcoin mining capacity. The stock is near a potential bottom, with positive divergences on momentum indicators, but confirmation requires breaking above the 20-day EMA. Bitcoin's performance is crucial for Hut 8's bull case, though current market conditions are risk-off, creating risk to the stock. Hut 8's restructuring and projected profitability, along with the potential for significant revenue growth, present a compelling long-term investment opportunity. Hut 8 Corp. ( HUT ) made waves earlier this week on news it was forming a new venture , in part with Eric Trump. Hut 8 is not a pure Bitcoin miner, but it’s definitely a big portion of the business, with this transaction ostensibly set to boost the share of the company’s business reliant upon the OG alt-currency. Details were a bit short in the news release, but it appears the market took it favorably. Indeed, the inherent connection with the current administration in the US can only be a good thing (regardless of how you feel about said administration). I think Hut 8, with this new venture, is priced pretty attractively, with some caveats. Let’s dig in. A bottom forming? That’s the big question on the daily chart below, as Hut 8 has lost about two-thirds of its value since the peak in December of last year. StockCharts This is not a bullish chart and I’m not going to try to make it sound like one. But what we have is a potential double bottom at just over $11, as well as positive divergences on the momentum indicators. Now, for this to confirm, we need the stock to crest the 20-day EMA in red above. It has tested that line twice in recent weeks, both unsuccessfully. We’ll see what happens but for now, we’re in a range of just over $11 to just over $13. I wouldn’t necessarily try to bottom-fish today, but the closer we get to the $11 level, the better the risk/reward. Conversely, a break over the 20-day EMA would also represent a bullish character change in this chart, and could be seen as a buy signal. Bitcoin is obviously a big input for Hut 8’s bull case, particularly with the new venture having been announced, so let’s take a look there. StockCharts Bitcoin broke down bearishly back in February and has not reclaimed any sort of bullish stance. I still believe it will at some point, but that point is not right now. General risk-off behavior reigns in financial markets today, and until that changes, it’s hard to be bullish on Bitcoin. On the bullish side of the ledger, Bitcoin seems to be trying to put in higher lows, and is trading slightly higher on Liberation Day +1. It’s very early so let’s not get carried away, but I want to see the 50-day SMA crested, which we haven’t had since early February. That’s my tell on Bitcoin in terms of a bullish character change. I’d suggest that Hut 8’s value against that of the price of Bitcoin – in the bottom panel above – shows the stock is about as cheap as it’s been for a while. It could obviously get cheaper and that’s a risk, but the odds favor the bulls here more than the bears, on current evidence. On the weekly chart, we can see the 20-week EMA is almost exactly the same price as the 50-day SMA, making that level incredibly important. StockCharts On the downside, we have the 50-week SMA, which is just under $77k. It’s not looking like we get there based on current evidence, but the importance of that level cannot be overstated. If we fail $77k, we’re probably seeing equities in a bear market, and maybe worse. If that happens, Hut 8 is probably $6 or $8. That’s why we use stops, and I’d be looking to set stops somewhere around that double bottom near $11 to avoid bag-holding in the worst-case scenario. To sum up the charts, I’m cautious for now given the relatively neutral look of Hut 8 and Bitcoin charts, but I do think Hut 8 is likely pretty close to a potential bottom based upon current evidence. Buy on the news? Before we get to the American Bitcoin transaction, let’s quickly review what Hut 8 is before that transaction takes place. Investor presentation Hut 8 has three segments. The Power segment manages a portfolio of energy assets that generate about 35% of total revenue. The Digital Infrastructure segment is about 11% of revenue, and is a colocation business for data centers and Bitcoin mining. The Compute segment is where we get Bitcoin mining, albeit on a fairly small scale of just 5.5EH/s; the larger miners are ~10X that level. This segment about half of revenue (with a low-single digit percentage from “Other”). Based upon the above, analysts are looking for Hut 8 to become sustainably profitable as early as next year, with a projected profit of 77 cents per share and $466 million in revenue. Seeking Alpha These revenue growth rates are outstanding, and should reasonably produce meaningful profits if they come to fruition. We can see that on current 2027 projections (which is admittedly a long time from now), Hut 8 is trading at just over 5X earnings. The pieces are in place for a potentially significant rally from current levels, but a lot has to go right for that to happen. Here's how American Bitcoin would fit into Hut 8’s structure. Investor presentation Basically, American Bitcoin becomes a majority-owned subsidiary of Hut 8 in place of its current Bitcoin mining operation. Hut 8’s current miners will be moved to the joint venture, with Hut 8 owning most of it. The idea is that the joint venture will allow scaling of the company’s mining capacity more quickly than Hut 8 could do on its own. As we can see at bottom-right, Hut 8 believes its mining operations could be spun-off into a public company someday, to add a further variable for investors to consider. The American Bitcoin investors get 20% of the joint venture, with Hut 8 owning the other 80%, and an initial shared services agreement for five years. Does this change the narrative on Hut 8? I’m not sure it does, at least not for now. The joint venture says they can scale the company’s Bitcoin mining to 50+ EH/s and Hut 8, it’s because you think the new investors will scale Bitcoin mining more quickly than Hut 8 would have done on its own. The other thing for investors to consider is that there already exists other publicly traded miners with that sort of capacity, so creating 50 EH/s of capacity doesn’t set Hut 8 apart from others. It makes Hut 8 more competitive on Bitcoin mining than it is today, but keep in mind also that there are no details on just how long this may take, or how it’s going to be paid for. Feel free to speculate on those details, but this is not a game-changer for me personally. Still, if we set aside the American Bitcoin announcement, I think Hut 8 is still representing good value here. The stock has been obliterated in the past few months, and it looks overdone. I see early signs of a potential bottom on the chart, and so long as Bitcoin doesn’t fall apart, I am cautiously bullish Hut 8. This period of risk-off behavior in financial markets will likely continue to weigh on risk assets like Bitcoin and Hut 8, but for longer-term holders, I think accumulating here makes a lot of sense.
