– One Canadian data center operation, Hut 8, has been very clear that it’s not selling its bitcoin stash in this very difficult market.
– Going long bitcoin, it turns out, doesn’t have to mean going all in on bitcoin. The lesson of this downturn turns out to be an old one: multiple cash flows are a good idea.
– Hut 8 holds 7406 BTC (just north of $150 million worth at current prices), according to their latest production update.
– It’s bringing in about 10 BTC per day (approximately $200,000). Core Scientific brings in 37 per day, but it also just sold all its bitcoin cheap.
– Sue Ennis, vice president of corporate development told Axios in a phone interview that “Focusing on revenue diversification is a huge part of our strategy and also having revenue that’s uncorrelated to the digital currency space.”
– Hut 8 spent $30 million to buy a data center that can do graphics processing, machine learning basically all the buzzy new cloud things.
– That generates something like $1.6 million a month for them in steady revenue that has nothing to do with the whims of token land.
– Ennis says they are targeting 15 to 18% growth in that business this year, which is good overall but also gives them a way to weather crypto downturns without unloading bitcoin at clearance prices.
– Bitcoin difficulty is dropping, which indicates that miners are powering down. Lower difficulty improves the returns for operations like Hut 8.
– Ennis says the drop can partly be explained by old hardware that’s no longer worth running. “Apparently about 25% of the total network hash rate was being run on S9s, and S9s are among the oldest miners out there,” Ennis said.
– Plus, Texas is in a heat wave, so many of their competitors shutting down to support local grids there.
– Hut 8 has a view into the market much deeper than the average person. Looking every day at prices for miners and used miners, they started to get a warning sign that trouble was coming.
– “Equipment that we had picked up in the previous bear market for $20 to $30 a terahash, we saw it start trading for $80 to $90 a terahash,” Ennis said.
– Hut 8 backed away from capital expenditures at that point, but all indications are that many others didn’t.