A movement is on in bitcoin mining among publicly traded companies that heralds the biggest change since the invention of asics back in 2013.
“After considerable planning, implementation of internal controls, counter-party risk review, and custody arrangements, in early January, Bitfarms has commenced a Bitcoin Pilot Retention Program.
Under this Program, for the first time, the Company is no longer selling all the Bitcoins earned… Since the start of this Program, Bitfarms has added over 150 Bitcoin to its balance sheet.”
So says one publicly traded bitcoin miner, Bitfarms (TSXV: BITF), which operates in Quebec, Canada.
Their 150 bitcoin, $7 million, is a small amount but they mine about 180 bitcoins a month, all of which will now be retained.
Their expansion will instead be funded by stock investors who buy their shares, with the company already having two private placements last month for C$40 million.
Their expansion plans include “a non-binding memorandum of understanding with a private energy producer to secure exclusive use of up to 200 MW of electricity in South America at an average price of US 2 cents per kilowatt hour (“kWh”).”
That’s cheap as energy costs in China are usually taken to be at five cent, with Bitfarm valued at C$390 million in market cap at a yearly revenue of about $100 million based on the current bitcoin price and hashrate.
A much bigger miner, Marathon (Nasdaq:MARA), has taken the further step of buying bitcoin, but it’s not clear whether they have a policy of holding the bitcoin they mine, which would be a completely different game.
Smaller miner Digihost Technology Inc. (TSXV:DGHI) has held to their coins which now total 183.7 BTC, with other crypto related publicly traded companies seemingly joining them.
BIGG Digital Assets Inc. (OTCQB: BBKCF) which owns Netcoin, this being a traditional crypto exchange rather than a coin, announced they have acquired 24.3 additional Bitcoins that are now “part of BIGG’s long term treasury holdings.”
This company further announced they intend to buy another C$5 million worth of bitcoin “over the next 5 weeks, dollar cost averaging the purchases.”
Smaller miners like CryptoStar Corp. (TSXV: CSTR) may have to follow suit. They’re tiny with a market cap of just $25 million but they seem to focus on ethereum mining and have seemingly secured a purchase of “85,680 MH/s Hashrate using the latest generation GPU miners which is expected to contribute 142.80 ETH or USD$145,473.22 per month.”
If they hold this eth, the sum is small so it might not make a significant difference in the market, but theoretically there can potentially be a huge advantage.
The stock market is a new tool to this space that combined with bitcoin mining can be a very big game changer.
That’s because if miners do not have to sell, and considering this is a deflationary asset, then you’re multiplying your revenue and profits.
Someone like Bitfarms not selling their mined bitcoin can be seen as a drop in the ocean or as a butterfly in the very complex Nakamoto incentives that underpin the ruthless game.
A twilight game in a way that hits hard at that prisoner’s dilemma because securing stable fiat from your mined bitcoin is an obvious choice, but selling a hard asset for worthless fiat while undermining your own revenue and profits is also potentially a stupid choice.
You add to this the bitcoin holders, who can buy their shares and so order these miners, and you get an increased incentive to avoid the selling because now it’s not just about a mining business – an individual arbing for profit – but a whole ecosystem and effectively a whole network of incentives.
It’s not even fully just about the cost of mining itself, because the shareholder may also be a bitcoin holder, and so he might take into consideration among other things the fact the Chinese Communist Party has blockaded this space since 2017 by closing crypto exchanges while it facilitates their bitcoin miners and maybe even subsidizes them, something he too can now do as you can’t compete with free money ‘subsidy’ through a stock.
The stock market so being a tool of capital formation, you’re basically giving miners money to expand and gain more hashrate so that you can order them to do what you want – hold the coins – and also so that they can be under public direction instead of CCP’s.
In theory therefore one could well wonder why not just ignore completely P/E and all the rest – while crossing fingers in the hope there is a competent management team – if the share price is just a bank they can use to get more hashrate and expand and dry up the bitcoin supply while at the same time getting some revenge for China’s blockade by funding western miners and so effectively bankrupting China based miners until they stop the blockade.
For the latter one has to consider it is still Chinese companies that dominate asics manufacturing, but by the same logic, why can’t something like Northern Data – or some other publicly traded company flushed with stock investor’s cash – get Swedish and German engineers to play with bitcoin semiconductors, or indeed get some AMD offshoot to do it
if the corporation wasn’t so gray.
Otherwise said, this development is far too new to consider manufacturing itself, but where it concerns the hashgame, one can easily see some magic in using pure capital formation not as some mathematical formula of price to revenue and earnings, but as a door of opportunity that can be opened to usher in a golden age of European and American mining by facilitating upfront capital to expand and take market share as well as perhaps to try and manufacture the whole thing while innovating on current asics.
In the process so freeing bitcoin, or at least giving it its ultimate form where 51% of the hashrate is indeed owned by us.
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