In its third-quarter earnings release, Canadian cryptocurrency miner Hut8 announced that it surpassed its goal set earlier this year of holding 5,000 Bitcoins (BTC) in reserves through mining. Its Bitcoin balance now amounts to 5,053, for a total market value of $430 million.
During the quarter, Hut 8 generated 50.34 million Canadian dollars (CA$) in revenue and CA$23.37 million in net income, up from CA$5.75 million in revenue and a loss of CA$0.90 million in the prior year’s quarter. The company hosts a sizable fleet of Application-Specific Integrated Circuit, or ASIC, machines used for Bitcoin mining. In addition, it deploys NVIDIA GPUs to mine Ethereum (ETH).
The company’s total hash rate (Bitcoin and Ethereum mining combined), or the number of guesses per second needed to obtain a mathematical solution to mine a new block on a proof-of-work blockchain, amounts to 1.7 exahashes per second (1.7*10^18 hashes/s, EH/s). In context, the total hash rate of the entire Bitcoin network is 162 EH/s, according to data provided by Blockchain.com. As for Ethereum, that number stands at 817.06 terhashes per second (817.06*10^12 hashes/s, TH/s), according to data provided by 2Miners.com. The firm’s contracted mining capacity for Ethereum stands at 1.6 TH/s.
Hut 8 adopts a hold-on-for-dear-life, or HODL, strategy when it comes to mining Bitcoin; that is, it does not seek to sell them under most circumstances. The firm also lends out its BTC to farm yields, and claims to mine close to 20 BTC per day.
Location of Hut 8’s crypto mining operations. | Source: Hut 8 Q3 2021 Earnings Call Presentation
The company operates in the Canadian province of Alberta with plans to expand to Ontario. It uses a mixture of natural gas, wind, and green energy for its mining operations.
Shares of publicly-traded bitcoin mining companies continue to outperform, with many of them up big this week.
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Shares of publicly-traded bitcoin mining companies continue to outperform, with shares of Riot Blockchain (RIOT), Hut 8 Mining Corp (HUT), Marathon Digital Holdings Inc (MARA) and Bitfarms Ltd (BITF) up big during Thursday’s trading session.
It was announced this week that trillion-dollar asset manager Fidelity had purchased a 7.4% stake in Marathon Digital on July 22 to add to four of its index funds. The news of Fidelity’s acquisition came following Marathon’s announced intention of purchasing 30,000 Antminer S19J Pros for $120.7 million.
Overall, bitcoin miner valuations continue to skyrocket, and have actually outperformed the price of bitcoin in a substantial way since the May 2021 market liquidation event.
Publicly-Traded Miners Denominated In BTC Since May 2021
Since the start of 2020 in particular, miner stocks have outperformed by a wide margin.
While it is important to note that investing in mining stocks (obviously) does not offer the same freedom and flexibility that comes with acquiring and holding bitcoin the bearer asset, it is notable that miners seem to function as high beta bitcoin during an upcycle.
Publicly-Traded Miners And BTC Performance Since 2020
Another increasingly bullish trend that has been developing over the past couple months has been the steady increase in bitcoin held in miners’ wallets. Due to the steep decrease in miner difficulty following the mass miner exodus out of China, profit margins have increased significantly for the remaining operations able to stay plugged in.
Bitcoin in miner wallets has increased by 6,2018 since June 9.
North American bitcoin mining company Hut 8 has purchased 11,090 rigs for $44 million to complement an earlier purchase of 863 machines.
Hut 8 Mining Corporation has announced a $44 million purchase of 11,090 WhatsMiner MicroBT M30S, M30S+ and M31S bitcoin mining rigs from Hong Kong-based company SuperAcme Technology.
The purchase complements an earlier one of 863 M30S+ and M30S miners, which Hut 8 expects to be delivered and deployed this month. However, the latest batch of machines won’t be delivered until October, with full deployment expected to be completed by December 2021.
Hut 8 plans to employ the almost 12,000 rigs in a 100 megawatt (MW) facility being planned, reportedly being developed in partnership with Validus Power. Additionally, the company expects these miners to amount to a hashing capacity of around 1.081 exahashes per second (EH/s) after full deployment.
According to its website, the bitcoin mining company currently has two farms in Alberta, Canada. An operation in Medicine Hat is said to have a 67 MW capacity with 0.7 EH/s ability, while a mining farm in Drumheller houses 43 MW of power and a 0.34 EH/s capacity.
If Hut 8’s plans are actualized, the company could reach around 2.5 EH/s hash rate capacity by the end of 2021. Considering the current rankings, this would make the mining firm the 11th-largest bitcoin miner globally, right behind SBI Crypto, which currently has 2.89 EH/s capacity.
While Chinese miners are being forced to relocate their operations overseas following the nation’s recent Bitcoin crackdown, North America has seen increased activity. In June alone, the region saw a mining farm that turns waste coal into BTC raise $105 million, an approval for bitcoin mining firm Hive Blockchain to list on the Nasdaq, Blockware Mining raise $25 million, and mining company in-the-making TeraWulf order 30,000 rigs from Bitmain.
Hut 8 Mining Corp., one of North America’s largest institutional bitcoin miners, announced today that it will be joining the Foundry USA Pool, becoming the largest bitcoin mining operation to do so.
“Hut 8 has added a portion of its total fleet; 14,400 bitcoin mining machines, and over 0.81 exahashes of compute power to Foundry USA Pool,” according to a press release sent to Bitcoin Magazine.
Foundry USA Pool, run by Digital Currency Group’s (DCG) wholly-owned subsidiary Foundry LLC, began accepting institutional clients earlier this month. Existing clientele within the pool include Blockcap and Foundry itself.
Hut 8 will be the largest client in the Foundry USA Pool after joining, according to the press release. The pool offers competitive fees and payouts, making it a compelling North American alternative to an industry dominated by China-based operations. While bitcoin mining continues to progress in the traditional finance world, North America-centered operations serve to offer onshore investment opportunities.
“We are pleased to welcome them to our pool as we work towards securing North America’s
place among the world’s top-five bitcoin mining pools,” said Mike Colyer, CEO of Foundry, per the release.
As institutional investment in North American Bitcoin mining operations rises, the competition to acquire hash power continues to drive interest in mining pools. Foundry USA Pool is an excellent example of the potential benefit of pooling hashpower on large scale.
Despite the top publicly-listed Bitcoin mining firms operating at losses, their share prices have dramatically outperformed BTC over the past 12 months.
Appearing on CNBC, Fundstrat’s vice president of digital asset strategy, Leeor Shimron, shared his analysis into the market performance of the four-largest publicly-traded mining firms — Marathon Digital Holdings, Riot Blockchain, Hive Blockchain, and Hut 8, each of which represent a market cap of more than $1 billion.
Over the past 12 months, Shimron found the average return for shares in the mining firms to have been 5,000%, while BTC has gained 900% over the same period. Unsurprisingly, the stocks were found to have a “high positive correlation” with BTC.
The researcher concluded that for every 1% price move in BTC, Bitcoin mining shares move by 2.5% on average. However, the observation applies to both upward and downward price moves, meaning mining stocks are likely to plummet with more than twice the aggression of BTC during bearish market conditions.
“They’ll probably be hit hard as Bitcoin draws down,” he said.
Shimron attributed the wild volatility in miner stocks to the lack of regulated crypto investment products in the United States, speculating that “until a Bitcoin ETF is approved, investors may view public mining companies as one of the only ways to get exposure to Bitcoin.”
“Since the primary source of revenue is Bitcoin, these companies are fundamentally long [on] the industry — so investors are essentially making a ‘picks and shovels’ bet when they invest in miners.”
Noting that Coinbase’s shares are “trading at a roughly $100 billion valuation in the private markets,” Shimron added: “Clearly there is investor appetite to gain exposure to operators within the crypto space, and miners are just another segment within that.”
Shimron also noted that supply chain disruptions amid the coronavirus pandemic were beneficial to the four largest mining firms — who were able to stock up on next-generation hardware, such as Bitmain’s Antminer S19 series.
“They’ve made a huge capital investment and operate at a loss to position themselves for the current bull run,” he said, adding:
“By building up their cash rate capacity and increasing their operating leverage, they effectively shield themselves from competition amongst new miners. So they’ve increased their economies of scale to retain market share, and I believe that should pay dividends going forward.”
Hut 8 Mining Corp. has announced a partnership with financial services firm Foundry Digital to secure $11.8 million in financing, which it will put toward 5,400 new MicroBT Whatsminer M30S mining rigs, adding 475 petahashes per second (PH/s) to its mining capacity over the next six months.
The financing is structured as a 12-month term with an annual interest rate of 16.5 percent.
In the recently-published announcement, Hut 8 CEO Jaime Leverton acknowledged that securing new mining equipment is a big challenge for everyone in the business right now.
“This partnership builds on Hut 8’s ongoing commitment to shareholders by mitigating supply constraints and reducing our capital expenditure with a proactive fleet management strategy,” said Leverton.
Once the new equipment is installed, the total hash power coming from Hut 8 (named after Hut 8 in London’s Bletchley Park, where Alan Turing broke the Nazi’s enigma code) is expected to rise from 825 PH/s before the agreement to 1,300 PH/s. Hut 8 has two mining farms in Alberta, Canada, in Medicine Hat and Drumheller. Most of its energy supply comes from natural gas, which is often vented as a byproduct of oil production.
New York State-based Foundry Digital, a subsidiary of Digital Currency Group, partnered with MicroBT in September 2020 to secure access to its mining equipment. As a result, despite a worldwide shortage in new mining equipment that can include months-long waiting times, the parties involved are hopeful that the first of Hut 8’s new machines will arrive by the end of January.
North American Listing Is Good For Business
Hut 8 is one of only two Bitcoin companies and the only bitcoin mining company listed on the Toronto Stock Exchange (TSX) “senior board.” (Financial services firm Galaxy Digital is also listed on the TSX senior board).
Bitcoin mining company Bitfarms is listed on the Canadtian Venture Exchange (CVE), while NASDAQ lists Riot Blockchain, Marathon Patent Group and HIVE Blockchain Technologies.
See Also
Hut 8 cofounder and former CEO Andrew Kiguel told Bitcoin Magazine in a phone interview that going public had helped the company in securing capital funding, such as this recent partnership with Foundry.
“Hut 8 is well positioned to attract new investors as a result of its listing on the Toronto Stock Exchange, Canada’s largest senior exchange and that it has cleared the ability to file a prospectus with the Ontario Securities Commission,” Kiguel said. “Hut 8 was the first blockchain entity to obtain a listing on the senior exchange and to use a short-form prospectus to raise capital.”
CoinDesk reported that Hut 8 shares have gained over 190 percent in the past year, but are currently down over 40 percent from their peak near $8.50 in early January. Foundry Digital also recently partnered with another mining leader, Compute North, to help them secure 14,000 new M30Ss through its partnership with MicroBT.
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