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Hut 8 Mining is a Lean Bitcoin Miner Now on the TSX

Hut 8 is trading 75% similar to Bitcoin and the company is coming off a record quarter.

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Hut 8 Mining is one of the largest Bitcoin miners in North America, and they recently debuted on the TSX. Hut 8 made it onto Canada’s largest stock exchange after a successful listing on the TSX’s Sandbox program.

The company offers investors an interesting opportunity as Hut 8’s value is the appreciation of its Bitcoin inventory and its low-cost mining operation. At the moment, the company currently is operating at 963 peta hashes per second (one petahash is equal to one quadrillion hashes per second) and represents about 1% of the total bitcoin mining market, and to date, the company has mined 10,000 bitcoins across their 94 mining centers. In addition, and this is one Hut 8’s biggest differentiators, the company uses a variety of renewable energy sources for the 109.4 megawatts they consume.

Hut 8, named after the location in Bletchley Park where Alan Turing broke the Enigma code, is essentially a partnership with the Bitfury Group (the latter owns 47% of the company), the large Dutch cryptocurrency mining and technology company, and the company is partially trailing the price of bitcoin (although it has decoupled slightly over the last few months) – as mentioned above, the company holds onto an inventory of bitcoin to let them appreciate in value and sells Bitcoin at what they see as peak price points to pay fiat expenses – but not to the extent of Grayscale Bitcoin Trust. Yet, the company does see their stock as providing exposure to Bitcoin minus the hassles of opening a wallet and the other “confusing” aspects of cryptocurrency.

In Q2, the company set record revenues of CA$28.3 million and adjusted EBITDA of $17.3 million, while mining the most Bitcoin they have ever mined in a quarter, 2,816 BTC. That last number is up from 786 from the same period in the prior year. The driver for Hut 8’s increased mining output was an increase in miners in operation. Plus, the company’s cost per Bitcoin was CA$2,757, which is a 30% decrease from Q1 2019, where they spent CA$3,950 per Bitcoin mined. This is impressive considering that the network difficulty to mine Bitcoin increased by 24%.

“Our net income for the quarter including the revaluation was $33.7 million which works out to $0.43 per share. That included a gain of $22.4 million under reassessment of our Bitcoin inventory as most people on the call would know part of our value proposition is to retain our Bitcoin inventory and for that quarter, we were able to benefit from the price of Bitcoin increasing throughout the quarter, ”CEO Andy Kieugel said on the company conference call (numbers in the quote refer to Canadian dollars).

Obviously, the company is excited about their Q2 results considering last year was not the best year for bitcoin miners especially the end of the year. But, Hut 8 learned from the Crypto Winter to scale down operations and trim overhead. On a micro-scale, the company reduced expenses to CA$637,000 in Q2 from CA$747,000 in Q1.

Hut 8 represents a Bitcoin Maximalist stock on the public markets that is trading around 75% similar to Bitcoin. The company has a leadership team that is experienced in investment banking and has so far shown a restraint that if often lacking in cryptocurrency leadership teams.

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