Hive Blockchain is one of the first cryptocurrency mining companies to be publicly listed and has gained a lot of attention from investors. As a pure-play miner focusing on Bitcoin and Ethereum, Hive provides exposure to the growth of top cryptocurrencies while avoiding risks from holding the assets directly. However, the profitability of mining largely depends on crypto prices and mining difficulties. Investors need to understand the risks and potential of Hive’s business model. This article will analyze Hive’s mining operations, financial performance, future growth plans and risks to help investors make informed decisions.
Hive’s mining business and operations
Hive Blockchain operates cryptocurrency mining facilities in Canada, Sweden and Iceland. The company mines Bitcoin, Ethereum, Ethereum Classic and Zcash. However, Bitcoin and Ethereum contribute to the majority of revenues. As of March 2021, Hive had a hashrate of 1,030 PH/s and held 3,052 Bitcoin and 25,000 Ether. The energy-efficient mining facilities powered by renewable energy give Hive a competitive advantage. According to company estimates, Hive’s cost to mine Bitcoin is around $3,000 per coin, significantly lower than the current market price. While many miners hold the coins they produce, Hive said it will continue to sell Bitcoin to fund operations and growth plans.
Hive’s financial performance and valuation
For the fiscal year 2021 ended March 31, Hive reported revenues of $66.7 million, a significant increase from $13.7 million in fiscal 2020. However, Hive remained unprofitable with a net loss of $48 million in 2021. The losses were attributed to non-cash expenses like depreciation and share-based compensation. Hive said it mined over 315 Bitcoin and 4,032 Ether during 2021. At current crypto prices, the coins mined are worth around $345 million. As of June 2021, Hive had a market capitalization of $1.5 billion. The company’s share price has surged over 3,100% in the past year as investors bet on the long-term growth of crypto mining.
Hive’s expansion plans and access to capital
To boost mining capacity, Hive acquired a 50 MW data center in Canada in August 2021. Hive said the facility will allow it to mine an additional 60 Bitcoin per month at current difficulties. The company also inked a strategic partnership with crypto mining specialist Galileo to develop advanced ASIC chips and mining systems. To fund growth plans, Hive has been raising capital through bought-deal offerings. It raised around $100 million in February 2021 by issuing new shares. Hive said it will use the proceeds for more ASIC purchases, expansion of facilities and working capital.
Key risks facing Hive Blockchain
Hive faces considerable risks from volatility in crypto prices which directly affects mining profitability. There are also risks from increasing mining difficulty and competition in the industry. As more miners come online, the Bitcoin and Ethereum networks adjust to make mining harder. Hive’s technical edge may diminish if competitors catch up. Furthermore, since Hive sells all mined coins, it does not benefit if prices rally after selling. Regulatory risks in the crypto industry also persist. Any restrictions on mining or trading in key jurisdictions may impact Hive’s business model.
In conclusion, Hive Blockchain provides exposure to the growth potential of crypto mining. But the business is inherently risky due to crypto price volatility. Investors should assess if Hive can maintain its low-cost position and capitalize on industry growth in the long run.