What Institutional and Retail Investors Should Consider Before Investing in Public Bitcoin Miners

Introduction

Reaching a milestone often offers the perfect opportunity for reflection. This marks my 100th article for Compass Mining, a journey that began three years ago with what was initially intended to be just three contributions. What started as a short-term commitment has evolved into an ongoing dialogue with the mining and investment community—something I consider both a privilege and a meaningful achievement.

This milestone also happens to align with a recent industry event: Mining Disrupt 2025 in Fort Lauderdale, where I had the opportunity to participate on a panel alongside three renowned Wall Street analysts. The session, moderated by Bryce McNallie, was titled "Wall Street vs. Main Street," exploiting the intersection of institutional and grassroots perspectives within the Bitcoin mining ecosystem. The panel  included Matthew Sigel, Head of Digital Assets Research at VanEck, Ruben Sahakyan, Director of Investment Banking at Stifel Financial Corp. and Kevin Dede, Senior Research Analyst at H.C. Wainwright & Co.

Hopefully, I managed to hold my own during the discussion—and in this article, I’ll share some of the key points raised during the panel that I believe are particularly relevant for both seasoned and prospective investors in the mining space.

Role of Public Miners

As Bitcoin continues to evolve from a speculative asset into a more established part of diversified portfolios, investors are increasingly exploring ways to gain exposure to the digital asset sector without directly owning the asset itself. One such route is through public Bitcoin mining companies. These firms, listed on major stock exchanges, provide equity investors with an indirect way to benefit from the performance of Bitcoin, while also introducing unique risks and opportunities tied to their underlying operations.

Whether you are an institutional investor seeking high-growth exposure to digital assets, or a retail investor drawn by the market excitement around Bitcoin, evaluating a public Bitcoin miner requires a deep understanding of factors beyond Bitcoin’s price alone.

Understanding the Cost of Mining

At the core of every Bitcoin mining operation lies the fundamental cost of production, which encompasses electricity costs, mining equipment efficiency, and operational scale. A miner's profitability is closely tied to its ability to produce Bitcoin at a lower cost than the prevailing market price.

Electricity typically represents the largest single expense. Companies operating in regions with low and stable energy prices, such as certain areas in North America and Northern Europe, often gain a competitive advantage. Additionally, the type and age of mining hardware significantly impact efficiency; newer, more efficient machines consume less energy per unit of computing power, enhancing profitability margins and resiliency during market downturns.

Investors should carefully examine company disclosures and financial statements to assess the average cost of mining a single Bitcoin and how this compares to current and historical market prices. A lower break-even point provides companies with a buffer against Bitcoin price volatility.

During this recent panel discussion, I highlighted critical operational and financial metrics in the mining sector, particularly energy costs and efficiency, based on monthly analysis of major miners’ performance. It’s essential to evaluate these metrics holistically, as many factors influence overall performance. Energy costs, being the largest expense, can effectively double the cost of each Bitcoin produced, after each halving. 

Miners must continue to secure the lowest energy prices to improve margins.  Cipher Mining (CIFR), IREN (IREN), Hut 8 Corp (HUT), Riot Platforms (RIOT), and Soluna Holdings (SLNH) are achieving energy costs as low or as close to $0.03 per kWh. 

While energy is the primary cost for Bitcoin miners, operating costs such as General and Administrative (G&A) expenses are also critical  costs where a company has a little more control. DMG Blockchain (DMGI), Hive Digital (HIVE) and Hut 8 Corp have been clearly implementing tighter management of these costs to enhance profitability in a challenging environment. 

Hashrate and Operational Capacity

Hashrate, a measure of computational power, determines a Bitcoin miner’s capacity to earn Bitcoin rewards. The higher the hashrate, the more likely a company is to successfully mine blocks and earn revenue. However, this metric must be considered in the context of the global Bitcoin network, where total competition is constantly increasing.

A growing or stable share of the global network hashrate suggests that a miner is maintaining its competitiveness, either through expansion or hardware upgrades. Institutional investors, in particular, may want to assess whether a company has a clear strategy to scale its operations through infrastructure investment or partnerships, as this often correlates with long-term revenue growth. 

Moreover, another reason for public Bitcoin miners to continue to grow is that the Global Hash rate has continued to increase exponentially since China banned bitcoin mining back in 2021 when the global hash rate then stood at around 60 EH/s.  In recent months that number actually surpassed 1,000 EH and currently sits at 906 EH/s, on a 7 day moving average.  

This rise has caused the mining difficulty to increase by 80% over the past 15 months, effectively reducing the level production per EH/s to the North American miners, as rewards are distributed across a greater hash rate.

Capital Structure and Financial Health

Bitcoin mining is not only energy intensive, but capital intensive as well. The hardware needed to stay competitive is expensive and often becomes obsolete within a few years. In response, many public miners raise capital by issuing shares or taking on debt, both of which can have implications for investors.

For retail investors, frequent equity issuances have resulted in dilution, thereby reducing the ownership percentage and potentially the value of each share. Institutional investors may also be wary of over-leveraged miners, particularly in bear markets where revenue could decline rapidly. Prudent capital management, a strong balance sheet, and transparency about future funding needs are therefore essential indicators of financial health.

Many public miners adopt a "hodl" strategy, keeping a portion of their mined Bitcoin on the balance sheet instead of selling it for cash. While this can enhance returns during bull markets, it also introduces volatility. In downturns, these holdings can lose significant value, and companies without sufficient liquidity may be forced to sell Bitcoin at unfavorable prices.

Investors should assess a miner's Bitcoin treasury strategy. Does the company routinely sell a portion of its Bitcoin to fund operations, or does it rely heavily on holding for long-term gains? For institutional portfolios with risk-management mandates, a more balanced approach may be preferable.

Matthew Sigel emphasized the importance of stability in the philosophical approach to being a public company, alongside the need for flexibility. He highlighted the significance of capital structure and the unique advantages a company possesses, questioning under what conditions a company might pivot to pursue better opportunities. 

He also noted that while operational efficiency is crucial, and whilst citing IREN as a best-in-class example, the efficiency levels among many of the top miners have converged significantly over the past year, reducing their competitive edge in this area. Ultimately, he acknowledged the challenges inherent in the industry, suggesting that communication may outweigh financial metrics in importance.

Jurisdictional and Regulatory Risks

Location is a critical factor for Bitcoin miners, as the regulatory environment significantly influences costs, growth prospects, and business continuity. Approaches to digital asset regulation, energy subsidies, and environmental policies vary greatly across countries and states. The abrupt crackdown on mining in China in 2021 exemplified how swiftly regulatory changes can disrupt operations.

Institutional investors, particularly those adhering to ESG criteria, often prioritize regulatory stability. Regions with clean energy, grid reliability, and clear regulations—such as certain U.S. states and Nordic countries—are increasingly attractive. Retail investors should also consider the long-term effects of geopolitical and policy risks on their investments.

In recent years, many public mining companies have relocated to the United States, drawn by a stable political and legal environment that enhances investor confidence and operational security. Access to robust financial markets, particularly the New York Stock Exchange, facilitates capital raising for exploration and development. The U.S. is rich in mineral resources, including critical minerals like lithium and copper, essential for clean energy technologies.

Government policies, such as the Inflation Reduction Act, encourage domestic mining by securing supply chains and incentivizing local production. This stands in contrast to jurisdictions with stricter regulations or geopolitical uncertainties, making the U.S. appealing for miners seeking reliable permitting processes, despite their complexities. Additionally, the country’s advanced infrastructure and skilled workforce improve operational efficiency. 

Growing global trade tensions, especially with China, have prompted companies to diversify away from foreign markets, positioning the U.S. as an attractive hub for innovation and headquarters, aligning with national security and economic objectives.  Whilst offering a predictable legal framework that is appealing for companies seeking long-term stability, the access to major financial markets like NASDAQ and the New York Stock Exchange facilitate easier capital raising, supporting growth and innovation.

States such as Texas have emerged as hotspots due to deregulated energy markets and abundant natural gas resources, providing low-cost energy essential for mining operations and  in particular, noted for its business-friendly environment and skilled workforce.

Examples of recent miner relocations:

• Hut 8 Corp., initially based in Canada, has relocated operations to Miami, Florida, and expanded in Texas, capitalizing on the state's favorable energy market and crypto policies.
• Bit Digital, recently located its operations within the US, transitioning from a foreign private issuer to a domestic issuer under U.S. securities regulations. 
• HIVE Digital Technologies moved its headquarters from Vancouver, Canada, to Texas in early 2025, citing supportive policies for cryptocurrency and energy-intensive operations.

These shifts underscore the U.S.'s growing prominence in the global Bitcoin mining industry, as companies prioritize jurisdictions that foster favorable conditions for growth.

Operational Excellence and Scalability

Beyond hashrate and geographic location, the day-to-day management of mining operations is a key differentiator in the Bitcoin mining sector. While some companies own and operate their own facilities, others rely on hosting arrangements. Both approaches can be effective, but the critical factors remain — operational reliability and maximised uptime.

Downtime, whether from hardware failures, energy disruptions, or inadequate site management, directly impacts revenue. Investors should prioritise companies with a proven track record of operational resilience and consistent output. Additionally, the ability to execute expansion plans efficiently — securing sites, deploying machines, and bringing capacity online quickly is essential in a fast-moving and scale-driven industry.

Ruben Sahakyanunderscored the importance of a strong energy strategy, particularly for firms pursuing an Initial Public Offering (IPO). He notes that effective energy management, covering procurement, capacity scaling, and trading, is essential for long-term success. While some companies may announce large energy capacities (e.g., 50 to 100 megawatts), the true differentiator is their ability to scale further, even to 500 megawatts. This creates a cyclical challenge, i.e. capital is needed to expand capacity, but larger capacity is often required to attract that capital.

Ruben went on to further highlight that companies without fixed Power Purchase Agreements (PPAs) must rely on strong energy trading teams to hedge market risks and meet operational demand. The presence of experienced energy professionals is therefore vital for navigating market volatility and sustaining growth in this capital-intensive industry.

The table below compares miners by BTC mined per EH/s, allowing a levelled comparison regardless of hashrate scale. Bitfarms and Hive Digital have consistently led this metric over the past four years, with IREN and DMG Blockchain also ranking in the top five annually, reflecting steady operational efficiency.

Management and Governance

In the dynamic and complex landscape of Bitcoin mining, effective leadership is crucial for distinguishing successful ventures from failures. Investors should closely evaluate the experience and expertise of management teams, particularly in technology, energy markets, and financial management.

For institutional investors, strong governance structures, board independence, and alignment of incentives are critical factors. Retail investors also benefit from leadership teams that prioritize transparent communication and provide regular updates, especially during volatile market conditions.

Kevin Dede emphasized the significance of financial metrics but highlighted that management flexibility is vital in this rapidly evolving industry. With hash prices approaching zero, securing low-cost energy has become essential for survival. Kevin also noted the substantial transformations within the sector over the past year, recognizing Bitcoin mining's potential to advance renewable energy initiatives and bolster grid support.

He pointed out that the success of small-cap companies often hinges on the CEO's vision and adaptability. Investors must assess a leader's ability to foresee changes, navigate uncertainty, and seize opportunities in uncharted territories. Given the inherent volatility of the crypto space, confidence in a management team's foresight and agility is crucial.

The recent strategic pivot by Riot Platforms serves as an example of this forward-thinking approach, focusing on maximizing power assets and generating more stable returns for shareholders while improving access to capital through predictable cash flows. In conclusion, adaptability is essential for management teams operating in this capital-intensive, ever-evolving environment.

Profitability Trends and Future Outlook

While many miners enjoyed record profits during past bull cycles, the true test of a company’s business model lies in how it performs during bear markets. Review past earnings, gross mining margins, and cost control measures to determine whether the company can sustain operations through market downturns.

Looking ahead, macroeconomic factors such as rising electricity prices, global interest rates, and future Bitcoin halving events will all shape the profitability landscape. Companies that are proactively planning for these shifts — by upgrading equipment, hedging energy costs, or diversifying revenue streams — are better positioned for long-term success.

Final Thoughts

As Bitcoin mining matures, institutional and retail investors alike must look beyond surface-level metrics to assess a miner’s long-term potential. While Bitcoin’s price is a key driver, success in this space increasingly hinges on operational efficiency, strategic capital deployment, regulatory foresight, and visionary leadership.

The most resilient companies are those that adapt quickly, manage energy and infrastructure intelligently, and remain transparent with stakeholders. As illustrated throughout the Mining Disrupt 2025 panel, investors should evaluate miners holistically, consider their cost structures, governance, location strategy, and scalability. In an industry defined by volatility and innovation, those who prepare thoughtfully will be best positioned to capture value.