Crypto Mining Firms Take Different Approaches to Selling Bitcoin

Hut 8 has no intention of selling its bitcoins, though other miners are offloading the asset to cover operations and fund expansions


Blockworks exclusive art by axel rangel


key takeaways

  • Riot Blockchain sold 300 of the 421 BTC it produced in June to help cover operational expenses
  • Hut 8 Mining plans to continue growing its computing business that generates $1.6 million in revenue per month

To hold or to sell — that is the question facing many cryptocurrency mining operations. Hut 8 is firmly taking the former approach.

Sue Ennis, Hut 8’s vice president of corporate development, told Blockworks that the company has no intention of selling its bitcoin any time soon.

The Canada-based company has 70 million CAD (about $53 million) on its balance sheet and an uncorrelated computing business generating 1.6 million CAD in revenue per month, Ennis noted. Unlike some competitors, she added, Hut 8 does not have large outstanding capital commitments for machines from orders made during the bull market.  

“Last year and well into this year we have focused on how we can diversify our revenue and take a balance sheet-first approach to when we’re buying machines and at what price point we paid for machines, so that we didn’t have to be in a situation, if things went sideways, where we had to sell this very valuable finite asset that we’re all chasing,” she said.

Ennis said Hut 8 would most likely only consider selling bitcoin if the asset’s price jumps well above its all-time highs — pointing to bullish long-term estimates from JPMorgan analysts and Ark Invest CEO Cathie Wood of bitcoin hitting $150,000 and $500,000, respectively. 

“At that point, maybe it would turn into sell a little bit, reinvest it back into the [computing] and Web3 side of our business,” she explained. “But again, we have no intention right now and no actual price point that we’ve got on our radar.”

Learn more: Is Bitcoin Mining Still Profitable? The Economics Explained

Bitcoin’s price was about $19,700 at 8 am ET, down roughly 71% from its peak of nearly $70,000 last November. 

While Hut 8 Mining seeks to hold its bitcoin for the foreseeable future and continue to grow its cloud computing business, other miners have sold or plan to sell BTC as the crypto downturn drags on.

Bitfarms revealed last month that it had sold 3,000 BTC in a one-week span. Chief Financial Officer Jeff Lucas noted that the sales were the best and least expensive source of liquidity in the current market environment. 

Texas-based Riot Blockchain started selling a portion of its monthly bitcoin production in March. The company sold 300 of the 421 BTC it produced in June — gaining net proceeds of about $6.2 million — to help cover operational and other expenses. Riot held roughly 6,654 BTC, as of June 30. 

The company continues progress on its 400 megawatt infrastructure expansion project at its Whinstone facility in Rockdale, Texas.

“It’s still important to us to have a strong bitcoin balance sheet, so we haven’t sold from the balance sheet per se,” Riot Blockchain CEO Jason Les told Blockworks, noting the firm has sold between 40% and 75% of its monthly bitcoin production. “There’s not a strict framework or policy around that. It’s a decision we are evaluating on a monthly basis.”

Compass Point Research & Trading analysts Chase White and Joe Flynn said in a June 28 research note that while they expect Riot to take on new debt or sell more of its bitcoin output, “the company is well-positioned to weather the volatility in the BTC market given its lack of debt and substantial BTC holdings.”

Hive Blockchain Technologies said in a statement last week that during “challenging times in the market cycle,” its expansion plans will be funded through the selling of its current product of bitcoin and ether (ETH).

The company has been selling ether over the past year to expand its bitcoin footprint, as its ETH position sank from 25,000 ETH to 7,667 ETH. But Hive said in the July 7 update that it seeks to maintain its bitcoin inventory levels, which stood at 3,239 BTC on July 6.

Marathon Digital, which held 10,055 BTC as of June 30, has not sold any bitcoin since October 2020, Charlie Schumacher, the company’s vice president of corporate communications, told Blockworks.

“While we are long-term believers in bitcoin, our decision to continue to HODL is a strategic one, not necessarily a principle,” he said.

“Bitcoin is a tool that we can leverage. By holding it, we can increase our financial optionality.”

The mining company obtained a $100 million revolving line of credit, secured by bitcoin and USD, with Silvergate Bank last October.

“That being said, given that we produce BTC at a fairly healthy margin, it may make sense for us to sell a portion of our monthly bitcoin production as our production ramps [up] as needed to fund monthly operating costs,” Schumacher said.

Hut 8 growing its computing business

Though mining remains Hut 8’s core business — accounting for about 90% of its revenue — Ennis said the company will focus more on its cloud computing and Web3 business. Hut 8 has been gearing up to do so since last year, the executive added, noting that the current macroeconomic downturn did not drive the decision. 

Ennis said that its computing business is on track to grow roughly 15% year over year as it seeks to serve more Web3 and blockchain-focused clients.

“Obviously the entire crypto industry has suffered, but at the end of the day, projects still need storage,” she said. “Projects still need security. Projects, especially in the blockchain gaming space, still need digital and render. So it is pretty sticky revenue regardless of what the macro economy is doing.”

Hut 8 acquired five data centers in Canada from wireless connectivity company TerraGo in January. The buy came after Jaime Leverton, who has a background in data infrastructure transformation, took over as Hut 8’s CEO in December 2020.

Ennis told Blockworks in March that Hut 8 is looking to provide an alternative to cloud computing giants such as Amazon Web Services, Google Cloud and Switch.

Hut 8 inherited government clients, as well as customers in media and entertainment and financial services using its cloud computing services. Though Ennis declined to disclose any new clients on the Web3 side, it has a nine-person sales team building a pipeline. 

Mining consolidation coming soon?

Steve Russell, co-portfolio manager of Emerald Mutual Funds’ Finance and Banking Innovation Fund (HSSAX), told Blockworks last week that he expects a “shakeout” over the next year or so from which winners and losers in the mining space emerge.

White and Flynn wrote in their research note that lower BTC prices — they estimate averages of $21,500 and $34,000 in the second half of 2022 and all of 2023, respectively — will likely “put a lid” on global hash rate growth.

Ennis said mergers and acquisitions are something that has been on the company’s radar, particularly following the company’s $172 million raise last September.

“I think there’s still some pain to be had,” Ennis said of the sector’s companies.

“We’ve certainly seen miners selling to pay down their balance sheet and capital commitments for equipment, but we still think there’s still a way to go.”

Les said Riot Blockchain constantly looks at potential merger and acquisition deals.

“We think that with our strong, unlevered balance sheet, we are in a position to be opportunistic here,” he said.

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