Mining companies that relied heavily on Ethereum have had their revenue slashed following the Merge. The survivors have pivoted to BTC mining, and Hive Blockchain is among them.
Former Ethereum mining giant Hive Blockchain is diversifying after the loss of its cash cow. The Ethereum Merge occurred in mid-September, after which it was no longer possible to mine the asset.
The switch 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 that can earn staking returns. However, companies that relied heavily on Ethereum mining have been hit hard.
Hive Blockchain is one of those companies, but its balance sheet looks healthy. BTC mining expert Jaran Mellerud has analyzed the firm’s third-quarter report revealing why Hive is likely to survive.
Pivot to BTC Mining
The analyst estimated that Hive lost 40% of its revenue after the Merge. He added that its “defunct ETH mining business was much more profitable than its remaining BTC mining business.” He added 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 mining facilities to BTC mining. The firm plans to grow its Bitcoin mining capacity from 2.8 EH/s (exahashes per second) to 3.3 EH/s by February 2023.
Hive also has a liquid balance sheet comprised primarily of Bitcoin holdings. According to the report, the firm has just $8 million in cash but holds 3,311 BTC accounting for 88% of its liquidity. This makes it the fourth largest BTC hodler among public miners.
Additionally, Hive has among the lowest debt-to-equity ratios of the public miners, Mellerud noted. With just $26 million in interest-bearing debt, it has been spared the massive debt service payments currently hampering its competitors.
Renewable Energy Benefits
Hive was the first crypto-mining company to go public in 2017. Furthermore, its fully hydro- and geothermal-powered operations are located in Canada, Sweden, and Iceland. This means that it hasn’t been exposed to massive energy price spikes that have hit other miners.
Furthermore, the firm has historically been able to squeeze out between 5% and 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 hash rates, and expensive energy. Hash rates had fallen 14% from their 273 EH/s peaks by Nov. 28, but since then, they have clawed their way back up to 251 EH/s.
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