Crypto-mining companies take different approaches to selling Bitcoin

Holding or selling – that is the question many mining operations with cryptocurrency face. Hut 8 certainly takes the previous approach.

Sue Ennis, Hut 8’s vice president of enterprise development, told Blockworks that the company has no intention of selling its bitcoin right away.

The Canada-based company has $ 70 million in balance sheet and an uncorrelated computer business that generates $ 1.6 million in revenue per month, Ennis noted. Unlike some competitors, she added, Hut 8 does not have large outstanding capital liabilities for machines from orders made during the beef market.

“Last year and well into this year, we have focused on how we can diversify our revenues and take a first-rate approach to when we buy machines and to what price point we paid for machines, so that we did not have to be in a situation, if things went sideways, where we had to sell this very valuable final asset that we are all looking for, “she said.

Ennis said Hut 8 would most likely only consider selling bitcoin if the asset’s price jumps well above all-time highs – pointing to bullish long-term estimates from JPMorgan analysts and Ark Invest CEO Cathie Wood for bitcoin hitting $ 150,000 and $ 500,000, respectively. .

“At that point, maybe it’s going to sell a little bit, re-invest it back in [computing] and the Web3 side of our business, ”she explained. “But again, we have no intention right now and no actual price point that we have on our radar.”

The price of Bitcoin was around $ 19,700 at 08.00 ET, down about 71% from the peak of almost $ 70,000 in November last year.

While Hut 8 Mining seeks to retain its bitcoin for the foreseeable future and continue to grow its cloud computing business, other miners have sold or plan to sell BTC as the cryptocurrency declines.

Bitfarms revealed last month that it had sold 3,000 BTC in a week. CFO Jeff Lucas noted that the sale was the best and least expensive source of liquidity in today’s market environment.

Texas-based Riot Blockchain began selling part of its monthly bitcoin production in March. The company sold 300 of the 421 BTC it produced in June – and received net revenue of around $ 6.2 million – to cover operating and other expenses. Riot had about 6654 BTC as of June 30th.

The company continues its progress on its 400-megawatt infrastructure expansion project at the Whinstone facility in Rockdale, Texas.

“It’s still important for us to have a strong bitcoin balance, so we have not sold from the balance sheet itself,” Riot Blockchain CEO Lason Les told Blockworks, noting that the company has sold between 40% and 75% % of the monthly. bitcoin production. “There is not a strict framework or policy around it. It is a decision we evaluate on a monthly basis. “

Compass Point Research & Trading Analysts Chase White and Joe Flynn said in a June 28 research note that although they expect Riot to take on new debt or sell more of its bitcoin production, “the company is well positioned to withstand volatility in the BTC market, given the lack of debt and significant BTC holdings. “

Hive Blockchain Technologies said in a statement last week that in the midst of “challenging times in the market cycle”, their expansion plans will be funded through the sale of the current product of bitcoin and ether.

The company has sold ether over the past year to expand its bitcoin footprint, as its ETH position fell from 25,000 ETH to 7,667 ETH. But Hive said in the July 7 update that it seeks to maintain its bitcoin stock levels, which stood at 3,239 BTC on July 6.

Marathon Digital, which had 10,055 BTC as of June 30, has not sold any bitcoin since October 2020, Charlie Schumacher, the company’s vice president of corporate communications.

“Although we are long-term believers in bitcoin, our decision to continue with HODL is a strategic one, not necessarily a principle,” he said.

“Bitcoin is a tool that we can take advantage of. By keeping it, we can increase our economic freedom of choice.”

The mining company received a revolving credit line of 100 million dollars, secured with bitcoin and USD, with Silvergate Bank in October last year.

That said, given that we produce BTC by a fairly healthy margin, it may make sense for us to sell a portion of our monthly bitcoin production as our production increases. [up] as needed to finance monthly operating costs, “Schumacher noted.

Hut 8 is expanding its data processing business

Although mining is still Hut 8’s core business – accounting for about 90% of revenue – Ennis said the company will focus more on cloud computing and the Web3 business. Hut 8 has been preparing to do so since last year, the leader added, noting that the current macroeconomic downturn did not drive the decision.

Ennis said that the data processing business is about to grow by about 15% from year to year as it seeks to serve more Web3 and blockchain focused customers.

“Obviously the whole crypto industry has suffered, but at the end of the day, projects still need storage,” she said. “Projects still need security. Projects, especially in the blockchain gaming area, still need digital and rendering. So it’s pretty sticky income regardless of what the macroeconomy does. “

Hut 8 bought five data centers in Canada from the wireless connection company TerraGo in January. The acquisition came after Jaime Leverton, who has a background in computer infrastructure transformation, took over as Hut 8’s CEO in December 2020.

Ennis told Blockworks in March that Hut 8 is looking to offer an alternative to cloud computing giants such as Amazon Web Services, Google Cloud and Switch.

Hut 8 inherited public customers, as well as customers in the media and entertainment and financial services using their cloud computing services. Although Ennis refused to reveal any new customers on the Web3 site, it has a nine-person sales team building a pipeline.

Mining consolidation coming soon?

Steve Russell, co-portfolio manager of the Emerald Mutual Funds’ Finance and Banking Innovation Fund (HSSAX), told Blockworks last week that he expects a “shakeout” over the next year or so from which winners and losers in the mining area emerge.

White and Flynn wrote in their research note that lower BTC prices – they estimate an average of $ 21,500 and $ 34,000 in the second half of 2022 and the full year 2023, respectively – are likely to “put a lid” on global hash rate growth.

Ennis said that mergers and acquisitions are something that has been on the company’s radar, especially after the company’s increase of $ 172 million in September last year.

“I think it’s still a lot of pain to have,” Ennis said of the sector’s companies.

“We have certainly seen miners sell to pay down the balance and capital commitments for equipment, but we still think there is a way to go.”

Les said that Riot Blockchain is constantly looking at potential M&A deals.

“We believe that with our strong, uncertain balance, we are in a position to be opportunistic here,” he said.

Get today’s best cryptic news and insights delivered to your inbox every night. Subscribe to Blockworks’ free newsletter now.