The Bitcoin (CRYPTO: BTC) cryptocurrency posted a solid gain in the first half of 2024, starting with the introduction of spot Bitcoin exchange-traded funds (ETFs) in January. Bitcoin mining rewards were halved on April 19, hardly moving the crypto price right away but setting the stage for another four-year cycle of boom and bust. By the end of June, it had cruised to a solid 44.2% gain according to data from S&P Global Market Intelligence.

Then there's MicroStrategy (NASDAQ: MSTR). The enterprise software company decided to ride Bitcoin's coattails in the most amplified fashion four years ago. MicroStrategy's balance sheet held $7.5 billion worth of Bitcoin but only $81 million of cash by the end of March. Mirroring Bitcoin's rise with an extra shot of adrenaline, MicroStrategy shot up a whopping 118.1% in six months.

Meanwhile, most crypto miners didn't share the same bullish fate. The reward halving had an immediate effect on their financial results, and the leading miners headed in different directions. Marathon Digital Holdings (NASDAQ: MARA) saw a 15.5% price drop, while Riot Platforms (NASDAQ: RIOT) lost 40.9% of its market value. Highlighting the complex nature of today's crypto market, CleanSpark (NASDAQ: CLSK) managed to keep pace with Bitcoin's gains, pocketing a 44.6% return.

Same fundamental news, different market reactions

Why did these crypto-related investments head in different directions? Their operations are quite different and market makers are paying attention to these unique qualities.

CleanSpark

CleanSpark acquired a total of 13 new mining facilities from other companies in the first half, criss-crossing the American map from Georgia to Wyoming.

In addition, the all-American Bitcoin miner also crushed Wall Street's consensus estimates in February's first-quarter report and May's second-quarter update. This company turned a profit in these two earnings reports, both in terms of free cash flows and adjusted earnings per share.

With proven profitability, a debt-free balance sheet, $323 million in cash reserves, and a similar amount of Bitcoin holdings, CleanSpark looks ready to ride out the lower production rates of this rewards-halving cycle.

It's no surprise to see this success story inspire rising share prices.

Marathon

Marathon experienced the same rewards halving as CleanSpark and went on its own production facility buying spree. The company currently has 31.5 exahashes per second (EH/s) of installed mining gear, targeting the Bitcoin mining business. A much smaller machine park with a capacity of 0.6 EH/s is mining the smaller Kaspa cryptocurrency instead, diversifying Marathon's crypto operations a bit.

The crypto miner is also exploring international production beyond its Texas facilities, running a small test project in Finland and an energy grid partnership in Kenya. Marathon consumes more cash than it generates, and its Bitcoin holdings outweigh the cash balance by a ratio of 4 to 1.

Investors see this as a riskier structure, making Marathon's stock more vulnerable to economy-based challenges.

Riot Platforms

Riot Platforms runs a smaller Bitcoin mining operation than Marathon or CleanSpark. Its average production capacity stops at 11.4 EH/s, targeting 31 EH/s by the end of 2024. Both Marathon and CleanSpark aim for a 50 EH/s capacity at the same calendar milestone.

This company supplements its Bitcoin revenues with energy credits earned by lowering or stopping its mining operations when the Texan power grid needs a boost. The company is embroiled in an attempted stock-swapping buyout of smaller rival Bitfarms (NASDAQ: BITF), building a 14% ownership stake while Bitfarms adopted a poison pill policy.

The takeover is up in the air and investors generally hate uncertainty, so Riot Platforms' stock performance isn't impressing anyone in 2024.

MicroStrategy

MicroStrategy is a different story. The company doesn't run any Bitcoin mining machines, so it doesn't care much about the lower mining rewards.

Founder and chairman Michael Saylor's company does care deeply about Bitcoin's price, now and in the long run, since almost all of its cash reserves have been converted into Bitcoin holdings. Moreover, the company keeps buying more Bitcoin at every opportunity.

The purchases have been financed by MicroStrategy's software business profits, sales of additional stock, new debt, and in one short-lived test, even a loan secured by some of the company's Bitcoin holdings. This coin-buying strategy amplifies Bitcoin's gains when times are good, but also exposes investors to more risk when Bitcoin prices are down.

The cryptocurrency is up this year, so MicroStrategy's stock price benefits from the crypto trend.

How Bitcoin's halving drives crypto mining profits

The halving of Bitcoin's mining rewards makes it harder to run a profitable mining business -- at least for a while. This hard-coded four-year cycle is designed to limit the supply of new coins while the cryptocurrency builds its real-world demand.

The basic laws of supply and demand dictate rising prices in this scenario, and Bitcoin's price chart has shown this pattern in each of the first three halvings. History doesn't repeat, but it often echoes familiar patterns, and the fourth rewards halving cycle looks ready to send Bitcoin prices sharply higher over the next year or so.

This predictable trend is the foundation of Michael Saylor's Bitcoin strategy. It also weeds out weaker hands from the costly Bitcoin mining industry when rewards run low and Bitcoin's price hasn't started its skyrocketing routine yet. Riot's attempted buyout of Bitfarms is an ambitious but risky effort to capitalize on the target company's financial weakness before the crypto chart surges again.

There is a clear investor takeaway from the Bitcoin trends of early 2024: Understanding the cyclical nature of Bitcoin and the strategic moves of key players in the surrounding industry can provide a significant edge. Keep an eye on the players who thrive under pressure, because they're the ones likely to shine when the market rebounds. The presence of spot Bitcoin ETFs should boost and support the current cycle, thanks to a heavy inflow of money from institutional investors.

Should you invest $1,000 in MicroStrategy right now?

Before you buy stock in MicroStrategy, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and MicroStrategy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $791,929!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of July 8, 2024

Anders Bylund has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Why Bitcoin and Crypto Stocks Soared or Slumped in the First Half of 2024 was originally published by The Motley Fool