IPO Corner: Back To The Crypto Miners

Ready for a new term for your investing vocabulary? Great, here’s our phrase of the day: Bitcoin mining difficulty, and it refers to the degree of difficulty involved in discovering new bitcoin blocks through mining. While there are all kinds of fancy formulas and variables, there’s no need to go down the rabbit hole to know about this gauge. By simply being aware of it, it can help us understand what’s going on in the mining space.

As of October 10, the difficulty gauge has risen to an all-time high, up 13.55% from just the previous two week’s period. This is the largest move since May of last year. This sounds bad, but is it? As with any space, the mining space is going through growing pains, but it’s far from dead… and we might even be seeing that pressure in the space move things around in interesting ways.

Reports indicate grassroots crypto movements happening right under our noses, such as in sub-Saharan Africa. Recently, Chainalysis, an American blockchain analysis firm headquartered in New York, studied sub-Saharan Africa and found that, unlike some places like El Salvador, where crypto adoption has been driven from the top down, adoption in Africa is taking place from the ground up… and miners are a big part of that.

Digital Picks And Shovels

But why is that? Well, part of it might be the way we think. For a Western nation like America, we may not always think that much about our projects needing to kill two or three birds with one stone, because we’re not only used to getting our needs met, but we’re also used to getting them met without even needing to think about it. That’s not the case everywhere, and mining is helping with problems that we westerners often don’t have to think about, and that is driving adoption.

To demonstrate, we’ll point to a micro-hydro plant in rural Kenya implemented by crypto mining company Gridless. This particular village has traditionally lacked reliable electricity. Now, thanks to Gridless, the plant is mining bitcoin with the excess electricity to offset costs and is providing power in a way that is not intrusive to surroundings. Now, the mined bitcoin could reduce power prices by up to 90% as it provides energy.

What’s the assertion? That coin mining is the ideal way to monetize otherwise stranded renewable energy. This is a point we’d like to emphasize. Often, when we talk about coin mining, it’s strictly through the lens of how much money we can make and how fast… but coin mining has so many more possible applications and implications, and that’s where we’ll want to look for financial opportunities, into those crevices that could be overlooked.

Deals To Watch

The crypto mining market is set to grow to $17 million by 2028, up from $14 million in 2021. As we see this space grow, and we see mining doubling up in its usefulness, we expect to see mining continue to change, with more miners moving toward renewable energy and away from the energy intensive Proof of Work (PoW) model. A few of the firms we have our eye on while we watch these trends are Rhodium and Applied Blockchain.

Rhodium is a Texas-based mining giant which develops proprietary software and liquid cooling technology to self-mine bitcoin. The firm touts their technology as offering a prominent competitive edge over traditional air-cooled systems because it’s capable of predictably and consistently mining more bitcoin with fewer miners. This isn’t the first IPO announcement Rhodium has made, with their original date of late last year being postponed due to market conditions.

The company is now ready to move forward with the offering via a merger agreement with SilverSun Technologies, a publicly traded business technology solutions provider. According to the terms of the deal, SilverSun shareholders will receive a cash dividend of a minimum of $1.50 per share, approximately equal to $8.5 million, as well as one share of a stock dividend in a newly created SilverSun subsidiary called SWK Technologies. The merger will finalize by the end of the year, and the company will list on the Nasdaq.

Applied Blockchain (APLD), an enterprise blockchain firm that builds data centers for bitcoin mining, made its debut on the Nadsaq in April of this year, where it raised $36.1 million through the sale of 8,000,000 shares of its common stock at $5.00 per share. The Dallas-based firm is using the funds to access additional property for co-hosting facilities, enter into additional energy service agreements, and fund working capital and general corporate purposes.

Here at below $2, you can see how well Wall Street has responded so far. Nonetheless, the company’s first data center, built in North Dakota, has been a success. The facility’s entire 100MW of capacity has been fully contracted on multi-year contracts and is powered through a five-year Energy Services Agreement (ESA) with a local utility. The firm is working on two additional sites, one in Garden City, Texas and one in Ellendale, North Dakota that will supply 200MW and 180MW, respectively.

Could it be that crypto mining will move from an energy-sucking process that only takes to a process that us greener, helps with energy needs, and serves other purposes in our lives? Maybe… the space is still young and full of promise, so we’ll see, and we’ll be watching to see what the mining space becomes. Come back next week, we’ll have more on the latest developments in cryptocurrencies and everything related. See you then!