A quick look at Q2 earnings for public cryptocurrency mining companies:
- Revenue growth accelerated across the board.
- Miners aggressively expanded operations.
- Aggregated bitcoin holdings surpassed 14,000 BTC.
- Leverage across the industry is low.
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As of June 2021, miners experienced rapid revenue growth over the year. RIOT, MARA, and BTBT increased revenue by an astounding 1,669%, 10,147%, and 4,102%, respectively. HUT and BITF increased revenue by a more “modest” rate of 310% and 397%. Revenue growth was largely due to the rise in bitcoin price, which gained approximately 280% between 2020Q2 and 2021Q2. In conjunction, the Bitcoin mining exodus in China shifted difficulty downward and lowered network hash rate, boosting Bitcoin production.
Over the year, miners expanded operations:
- RIOT entered into purchase agreements to acquire 77,146 Antminers from Bitmain.
- MARA executed contracts with Bitmain to acquire 100,500 Antminers.
- BITF acquired 12,000 mining rigs from MicroBT and announced an additional purchase of 48,000 MicroBT miners.
- HUT announced the purchase of 5,400 Whatsminers earlier in the year, and then an additional 12,000 MicroBT miners at quarter-end.
- BTBT completed its purchase of 17,996 Antminers and Whatsminers.
It’s evident that miners are aggressively investing in mining operations, contributing to revenue growth. As bitcoin becomes increasingly difficult to mine, it’s pertinent to keep an eye on the cost of production. The average production cost of the five miners is near $35,000 per coin (calculated based on the cost of goods sold, operating expenses, and BTC mined) and the average sales price is $49,000 (based on revenue and BTC mined). MARA stands out from the group and was able to reduce its production cost to $21,000 per coin, representing a reduction of 66% over the year.
Notably, most of the mining expansion so far has been funded through equity. The average debt to equity ratio of the miners is 0.10, meaning debt comprises only 10% of the funding. Low debt to equity ratios indicate the miners are underleveraged and have room for debt offerings.
Overall, publicly-traded miners benefited from bitcoin production and price outpacing expenses.
Here’s what to look out for in 2021Q3 earnings:
- Miners have committed to additional ASIC purchases.
- Bitcoin price is up over 40% since the second quarter.
- Difficulty has recovered sharply since the China ban.
With the acquisitions of additional ASIC miners and rising bitcoin price, earnings for the third quarter should be robust and not deterred by rising difficulty; for the majority of the second quarter, miners operated near-all-time highs in difficulty and still reported strong figures.
