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Friday, September 30, 2022
HomeBitcoinBitfarms: Selecting Aside My Prime Bitcoin Mining Inventory (NASDAQ:BITF)

Bitfarms: Selecting Aside My Prime Bitcoin Mining Inventory (NASDAQ:BITF)



Bitfarms (NASDAQ:BITF) is a low-cost Bitcoin (BTC-USD) miner with an prolonged historical past of confirmed execution. The firm is conservatively financed and has a average, vetted progress plan that may proceed to seize share of the whole community hash fee. Though it has the bottom valuation among the many bigger cap miners, it’s arguably better of breed.

In a late June article, that may be discovered right here, I lined the power of Bitfarms’ place based mostly on a handful of key concerns. These included:

  • Makeup of the present and future mining fleet
  • Direct price to mine Bitcoin by tools sort
  • Qualitative elements of the operational arrange
  • Power prices and reliability comparisons
  • Cost of gross sales per bitcoin mined
  • Relative dimension of administrative bills
  • Valuation, adjusted EBITDA, and profitability metrics
  • Capital and financing bills and liquidity

In distinction to the prior article, the dialogue beneath is concentrated on rising threats and the adjustments during the last quarter. And be aware the elements lined shall be extra Bitfarms’ particular versus macro influences akin to regulation or rate of interest coverage. These will embrace:

  • Direct prices of manufacturing: hash fee traits, Canadian VAT, Argentina gasoline
  • Financing: Bitcoin administration technique, legal responsibility discount, Argentina miners
  • Bitmain S19 XP Threat

Direct Costs of Production

Looking on the vitality element, through the second quarter the first driver to the per coin prices remained the expansion within the whole community hash fee. Direct energy prices per bitcoin had been $9,900, up 14% from $8700 within the first quarter. Management defined the dynamic as follows:

12 share factors from the rise in quarter-over-quarter common community problem, which is partially offset by an equal of a 3 share level lower from incremental working effectivity achieved through the quarter, and with 5 share factors of the rise attributable by means of the accrual for potential Canadian tax laws affecting VAT tax charges…

Source: Q2 2022 Results – Earnings Call, seekingalpha.com, 8/15/22

Q2 2022 Direct Costs of $9,900 Compared to Prior Quarters

Bitfarms' Power Costs Per Coin


The low prices in Q3 of 2021 proven above are attributable to the crackdown on mining in China and correspond to the trough proven within the whole community hash fee graphic beneath. Also of be aware within the graphic beneath, July of this yr has seen a reversal in trajectory and pull again in whole community hash fee as low effectivity miners have gone offline with the BTC-USD value disruption. For this purpose, miners’ electrical prices seemingly will not present one other giant enhance in Q3.

ChartBitcoin Network Hash Rate knowledge by YCharts

Moving to the 5 share factors attributable to the tax accrual, the Canadian Financing Authority could go laws that removes the restoration of VAT. Bitfarms’ energy prices in Canada would go from $0.04 to $0.046 per kWh. Though the laws will not be but permitted, accounting procedures acknowledge the accrual and it’s included within the $9,900 mentioned above. For reference, 88% of Bitfarms’ present electrical energy could be affected.

Looking forward, pure gasoline costs are driving warning for the Argentina growth. Only a portion of the facility contract is mounted at $0.022 per kWh. There is concern in out-years there could possibly be profitability pressures pushed by market pricing. But on steadiness, international trade strikes are benefiting the challenge and Argentina is partially proof against the worth will increase throughout winter months within the northern hemisphere. For now it seems vitality prices shall be beneath the corporate common and mining begins later this yr.

Financial Deleveraging

Bitfarms is transferring to a decrease danger, decrease upside monetary technique. After having purchased 1,000 bitcoins earlier within the yr at roughly $43,000 every, the corporate now bought over 3300 cash at a mean close to $20,000. Going ahead the corporate will seemingly fund operations and curiosity expense from present BTC manufacturing. This effort is geared towards having decrease prices of capital, elevated liquidity and considerably restricted dilution. There are alternative prices from abandoning the HODL stance as BTC-USD could respect sooner than the prices of capital by means of different sources of financing.

Commitments Outlook on June 21, 2022

Bitfarms' Capital Expenses Ongoing


The firm is lowering whole liabilities and thru July took the steadiness of their Bitcoin backed mortgage from $100 million to $23 million (high line of graphic above). This will decrease curiosity expense by at the least $7 million on a per yr foundation. The firm additionally renegotiated the timing of miner deliveries to Argentina to raised align with the up to date buildout schedule. $39 million in capital expense scheduled for This fall 2022 strikes to the primary 9 months of 2023 (“MicroBT” line close to backside of graphic).

Concerning the brand new mining tools going to Argentina and prices of capital, analyst Kevin Dede of H.C. Wainwright elicited an attention-grabbing level on the latest earnings webcast. Because of lender necessities, it’s unlikely that mining rigs situated in Latin America could possibly be used to collateralize future financing. This is necessary as a result of a considerable portion of latest tools shall be positioned on the Argentina growth and out-year growth is being thought of in Paraguay. Though it needs to be famous that there stays addition tools within the U.S. and Canada that has not been used as collateral. Note for reference the tools backed loans are the center part of the graphic above.

Bitmain S19 XP Threat

At the top of July Bitfarms’ common joules per terahash measure of effectivity was at 40.6, improved from 49.1 a yr in the past. For instance, MicroBT M30S+ tools is at present driving elevated common effectivity by each changing older rigs in addition to using web new energy provide. Note, the M30Ss are within the mid-30s when it comes to wattage per terahash. For reference, 1 watt equals 1 joule per second.

The firm does have a restricted variety of Bitmain S19j Pro rigs on the U.S. facility rated about 31 watts per terahash. But for probably the most half, Bitfarms is seeking to keep on with MicroBT as the first provider. Last yr in May they grew to become the primary approved MicroBT service middle in Canada. And they’ve a robust historical past of efficiency with the MicroBT tools when it comes to reliability. Looking ahead, new tools contracts in 2023 will seemingly be for the MicroBT M50S tools that has an influence effectivity of 26 J/TH.

But… numerous Bitfarms’ shut rivals are simply starting so as to add Bitmain S19 XP tools with an influence effectivity of twenty-two J/TH. In a broad generalization, the MicroBT tools prices much less per terahash of computation capability to initially buy, however price extra to function per terahash than a Bitmain product. From my perspective, as each manufacturers have comparable ROI because of the mixed prices dynamics, the controversy is considerably much less necessary at present Bitcoin costs. But going ahead the state of affairs should be carefully adopted. This is as a result of, relying on the Bitcoin costs, miners with increased effectivity fleets could also be higher positioned to seize share following the following Bitcoin halving in May of 2024.


Despite the 56% run-up in value since my June article, I’m sustaining the purchase ranking on Bitfarms. The is partially as a result of the worth of Bitcoin has gained 17% within the interim. As is true with the opposite miners, Bitfarms’ earnings are leveraged to will increase within the underlying and valuations based mostly on earnings multiples stay cheap.

ChartBITF knowledge by YCharts

As a secondary level, Bitfarms continues to be comparatively underappreciated from a market cap to operational hash fee perspective. Jointly take into account the next two comparisons within the graphics beneath.

BTC Mined First Half 2022



Market Caps 8/16/2022

$1.09 billion $1.24 billion $451 million $2.06 billion $693 million

Click to enlarge

Source: Author, with knowledge from Seeking Alpha

Admittedly one can not make these straight apples to oranges comparisons.

  • Core Scientific (CORZ) has considerably bigger, sooner rising manufacturing; however that is considerably countered by its meaningfully bigger liabilities. (no ranking)
  • Riot Blockchain (RIOT) has comparable manufacturing to Bitfarms, however a a lot stronger progress plans over the following two quarters; that is considerably offset by an unproven prices profile. (rated maintain)
  • Marathon Digital (MARA) has sturdy progress plans just like Riot; however their hosted mannequin has excessive uncertainty from an influence provide perspective. (rated maintain)
  • Hut 8 (HUT) has diversified their enterprise with knowledge middle acquisitions and non-bitcoin mining tools; that is considerably offset by meager Bitcoin mining progress plans and coming disruption from The Merge on the Ethereum platform. (rated purchase – beneath revision)

In comparability to above, Bitfarms has sturdy, confirmed execution of precise mined bitcoins. They have excessive manufacturing relative to market cap and a average, effectively vetted plan to develop and seize share although their Argentina growth. Proven all in prices, not together with non-cash gadgets, are about $16,500 per coin. The firm has a comparatively conservative monetary technique and manageable commitments.

My new market service is coming quickly. Complete Crypto Analytics is launching within the close to future and could have an in-depth, devoted Bitcoin miner comparability function. Please hold studying my articles right here for updates so you may reserve your spot as a Legacy Discount Member. There shall be a beneficiant introductory value for early subscribers. Thank you for following my work.


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