Why Bitcoin’s Halving Is Different This Time, According to One of US’s Largest Miners

Instead of purely prioritizing power, Hut 8 is focused on driving shareholder returns

By: André Beganski

February 21, 2024

As Bitcoin climbs to its highest price in more than two years, the Miami-based Bitcoin miner Hut 8 is prepared to leverage its stash of over 9,000 Bitcoin into the halving, according to the firm’s Head of Investor Relations, Sue Ennis.

Describing the Bitcoin held on Hut 8’s balance sheet as a multi-million dollar “war chest,” Ennis said that tapping the coin as a treasury reserve asset gives the publicly traded miner added flexibility. As the coin rises in a bull market, Hut 8 can reinvest in its business in a non-dilutive way, she said, providing one of the oldest mining firms in North America with a novel way to grow.

“After each halving cycle, Bitcoin has traditionally skyrocketed within the next 12 months,” Ennis said. “This is one of the reasons we've been super bullish on HODLing — so, hanging onto a lot of the Bitcoin that we mine.”

Last year, Hut 8 merged with US Bitcoin Corp, cementing the firm’s presence as one of the largest mining firms in the U.S. Pointing to the “operational expertise” of US Bitcoin Corp’s team, Ennis said it specializes in turning around distressed assets. That includes shopping in bankruptcy proceedings, such as a deal inked to flesh out a mining facility in Texas for NewCo, a company owned by creditors of the defunct crypto lender Celsius.

However, the introduction of spot Bitcoin ETFs in the U.S. has changed the way investors view companies like Coinbase, MicroStrategy, and Hut 8, Ennis said. Now that anyone can gain exposure to the price of Bitcoin through these newly-listed ETFs, she said, “We really believe that the onus is on miners to show how [you] are differentiated.”

“Instead of chasing exahash, we're thinking a lot about shareholder returns,” Ennis said, referencing the measure of a Bitcoin miner’s processing power. “We really look at ourselves … as energy operators with a Bitcoin sweetener upside. So, we're in the business of monetizing electrons.”

For example, Ennis said that Hut 8 could sell energy back to the grid instead of putting it toward Bitcoin mining if that resulted in better returns, or potentially investing in data centers or green technology. Meanwhile, analysts have raised concerns about Hut 8’s ability to weather the halving as Bitcoin’s daily block rewards are slated to be slashed in half in April.

In terms of the miner’s production costs, analysts from investment bank H.C. Wainwright & Co. claimed Hut 8’s are “industry-high” in a recent note, warning that Hut 8 is “inadequately  prepared to navigate the upcoming April 2024 halving event in its current form.” The note posited that Hut 8’s all-in production costs will be around $72,700 per Bitcoin post-halving, a figure that Ennis said is “definitely not accurate.”

“Our all-in cost per coin is actually much lower than that,” she said. “Prior to this merger, we didn't traditionally disclose our cost of energy or fleet efficiency … When you don't have the right disclosures out there, people have to guess and take shots in the dark.”

When it comes to Hut 8’s share price, the company’s stock has lagged competitors. The Valkyrie Bitcoin Miners ETF, which invests in companies in Bitcoin mining, has fallen 1% so far this year, while Hut 8 shares have fallen 30% to $8.81 during the same period.

Referencing a survey from the U.S. Energy Information Administration, Ennis said Hut 8 is passionate about dispelling “a lot of this FUD that still exists” around Bitcoin’s energy use. Arguing that “Bitcoin miners actually are a partner in the global transition to renewable energy,” she noted that over 51% of the network is mined using sustainable energy and Bitcoin miners have helped balance power grids, particularly in states like Texas.

While Hut 8 is poised for Bitcoin’s price to reclaim all-time highs, Ennis noted that this halving cycle will be different, with new factors driving Bitcoin’s growth and adoption. On the adoption front, she cited spot Bitcoin ETFs as a major driver of inflows, and pointed to the protocol Ordinals on Bitcoin as an additional source of growth for miners.

Allowing individuals to create NFT-like assets on Bitcoin by assigning data to individual satoshi — equal to 1/100,000,000 of a whole Bitcoin — Ordinals created an overnight windfall for Hut 8 last May, Ennis said. As the protocol’s use took off, transaction-based revenue from mining Bitcoin swiftly doubled, Ennis said.

“Bitcoin miners get paid to facilitate transactions on the network,” she explained. “And because Ordinals were taking up such a huge amount of volume and activity on the network, literally overnight, miners were able to double their transaction revenue, which was super meaningful.”

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