Since around 2017, our team has been researching infrastructure opportunities available to investors in the public markets. As we approach the fourth halving, expected around April 19th, we are pleased to see near-record daily revenue. This is encouraging as it reflects the business success of the industry, which currently has an operating rate of close to $26.1 billion (365 times). (1-day revenue of $71.6 million). With almost $100 million allocated to our portfolio and one of the most prolific investors in this space, the outcome of how this business is financed and valued is important to us.
Despite the optimism expressed by investors, it is understandable why miners and investors are facing the halving with anxiety. We would also like to point out that the profitable financial results for the first quarter that some miners were expecting look more than discounted at current levels. Many mining stocks have the potential for future EV/EBITDA multiples in the low single digits compared to 2024 and 2025.
Of course, the single-digit multiple assumed in the valuation metric must assume a Bitcoin price between $70,000 and $100,000, which is reasonable given the current Bitcoin price momentum. I claim that there is. On the contrary, given that these are technology companies, we must admit that achieving large-scale execution risk has proven to be a high bar.
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How we view the industry:
Bucket 1: Accelerators: CLSK, MARA, RIOT
Several companies, such as Cleanspark, Marathon Digital, and RIOT Platforms, have established themselves as large-scale miners that actively raise capital through at-the-market offerings (ATMs). These companies are expected to exhibit accelerated revenue growth due to significant beta from rising Bitcoin prices and Exahash expansion.
As such, they have derived competitive advantage from increased trading activity, ample financial liquidity, or a war chest to take advantage of acquisition opportunities. Those who have been disappointed that mining stocks haven't been able to keep up with Bitcoin's price lately are overlooking the fact that this correlation, while sustainable, often behaves like a coiled spring.> The problem is that Bitcoin K which is the timing and short term direction of the coin moving at $60 or $100,000. All stakes are $500,000.
Bucket #2: HPC-AI Group (IREN, CORE, BTBT, HIVE, HUT)
Practical-minded companies such as Core Scientific (CORZ), Iris Energy (IREN), Bit Digital (BTBT), or Hut8 (HUT) are undermining the pretext that traditional financial metrics are important in the context of measuring discipline. It is led by managers who operate below them. To be clear, these are definitely growth companies.
The problem is that the Bitcoin mining segment may not be the only source of growth. HPC-AI is an attractive business model and is in demand. AI computing is, of course, in high demand these days. AI computing centers are more predictable as a business than self-mining. But of course, there are fewer options than his $500,000 Bitcoin price.
Bucket #3: Distressed/Value Play
Just to be clear, I don't want to put it in this category. This is because the company is busy raising funds and is potentially in a difficult situation as a listed small-cap company. He doesn't think any company is in crisis, but he does note that there are about 15 to 20 microcap companies. Of course, just because they're struggling doesn't mean some of these companies can't survive or even grow to the top through acquisitions and consolidations.
