Hive Blockchain Switches to BTC Mining after ETH Merger Losses
Hive lost at least 40% of its revenue after the Ethereum merger. The company plans to increase BTC mining capacity until February 2023.
Mining companies that were heavily reliant on Ethereum have seen their revenues drop after the Merger. Survivors have turned to BTC mining, and Hive Blockchain is among them.
Former Ethereum mining giant Hive Blockchain is diversifying after losing its revenue stream. The Ethereum merger occurred in mid-September, after which it was no longer possible to mine the asset.
The move to Proof-Of-Stake has been good for the network in terms of ESG (environmental, social, and governance) compliance. It has also been good for ETH holders who can earn staking returns. However, companies that were heavily reliant on Ethereum mining have been hit hard.
Hive Blockchain is one such company, but its balance sheet appears healthy. BTC mining expert Jaran Mellerud has analyzed the firm’s Q3 report revealing why Hive is likely to survive.
Pivot to BTC Mining
The analyst estimated that Hive lost 40% of its revenue after the Merger. He added that “the defunct ETH mining business was much more profitable than its remaining BTC mining business, meaning that the actual loss to the company’s operating cash flows is likely around 60%.”
That was the bad news. The good news for Hive is that it is repurposing its Ethereum facilities for BTC mining. The company plans to increase its Bitcoin mining capacity from 2.8 EH/s (exhashes per second) to 3.3 EH/s by February 2023.
Hive also has a liquid balance sheet made up primarily of Bitcoin holdings. According to the report, the company has only $8 million in cash, but it has 3,311 BTC which represents 88% of its liquidity. This makes it the fourth largest BTC hodler among public miners.
In addition, Hive has one of the lowest debt-to-equity ratios of public miners, Mellerud noted. With just $26 million in interest-bearing debt, it has been spared the massive debt-service payments that currently hamper its competitors.
Renewable Energy Benefits
Hive was the first crypto-mining company to go public in 2017. Additionally, its full hydro and geothermal operations are located in Canada, Sweden, and Iceland. This means that it has not been exposed to massive spikes in energy prices that have affected other miners.
In addition, historically, the company has been able to squeeze 5-30% more BTC than most competitors. “This could be due to the company achieving a higher up-time due to consistent hydropower supply,” the analyst commented.
Bitcoin miners are currently in the doldrums with depressed asset prices, high hashrate, and expensive energy. Hash rates had fallen 14% from their peak of 273 EH/s on November 28, but have since climbed back up to 251 EH/s.
Mellerud concludes by stating that “Keeping the costs down and efficiency high will be vital for Hive to transform its business during this bear market.”
By Audy Castaneda