A bitcoin miner “hodling” as the crypto winter gets worse

A Canadian data center operation, Hut 8, has been very clear that it is not selling its bitcoin holdings in this very difficult market.

Why it’s important: Going long bitcoin, it turns out, does not have to mean going all in on bitcoin. The lesson from this downturn turns out to be old: more cash flows is a good idea.

• “The last time we sold was, I think, early January 2021. We sold a little bit,” Sue Ennis, vice president of enterprise development, told Axios in a telephone interview. “We do not want to sell at these price levels.”

According to the numbers: Hut 8 has 7408 BTC (just north of $ 146 million worth at current prices), according to their latest production update.

• It brings in about 10 BTC per day (about $ 200,000). Core Scientific brings in 37 per day, but it has also only sold all bitcoins cheaply.

What they say: “Focusing on income diversification is a big part of our strategy and also having income that is not correlated with the digital currency area,” said Ennis.

• Hut 8 spent $ 30 million to buy a data center that can perform graphics processing, machine learning – basically all the busy new shoots.
• It generates something like $ 1.6 million a month for those in regular income who have nothing to do with the lukewarmness of symbolic land.
• And yet, if web3 takes off, the Hut 8 technology table must show leadership there as well.

Ennis says that they are aiming for a growth of 15 to 18% in this business this year, which is good overall, but which also gives them a way to cope with cryptocurrency declines without unloading bitcoin at clearance prices.

Situational understanding: The Bitcoin difficulty is declining, indicating that miners are shutting down. Lower difficulty improves the return for operations such as Hut 8.

• Ennis says that the decline can be partly explained by old hardware that is no longer worth running. “Apparently, about 25% of the total hash speed for the network was run on S9s, and S9s are among the oldest miners out there,” Ennis said.
• In addition, Texas is in a heatwave, so many of its competitors are closing to support local networks there.

Red alarm: Hut 8 has a view into the market much deeper than the average person. When they looked at prices for miners every day and used miners, they started getting a warning sign that problems were coming.

• “Equipment that we had picked up in the previous bear market for $ 20 to $ 30 per terrahash, we saw it start trading for $ 80 to $ 90 per terraash,” Ennis said.
• Hut 8 withdrew from capital expenditures at the time, but all indications are that many others did not.
• “We like the prices where they are now,” Ennis said.

Zoom out: Hut 8 was founded in 2017 and is a listed miner that also offers other data processing services. The name is a reference to the code-breaking station from World War II once led by Alan Turing.