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Bit Digital Inc. (NASDAQ: BTBT)

Bit Digital Inc. (NASDAQ: BTBT) is engaged in the bitcoin mining business. Its mining platform operates with the primary intent of generating revenue from bitcoin mining. The company is headquartered in New York and its mining operations are located in the United States and Canada.

Bit Digital commenced bitcoin mining in February 2020. Its bitcoin mining operations, hosted by third party hosting providers, use specialized miners to generate bitcoins. The miners use application-specific integrated circuit (ASIC) chips enabling the miners to apply greater computational power, improving hash rate. Bit Digital’s mining strategy has been to mine bitcoins as quickly as possible, given the fixed supply.

In view of the long delivery lead time to purchase miners from manufacturers like Bitmain Technologies Limited and MicroBT Electronics Technology, the company initially chose to acquire miners on the spot market, allowing delivery within a few weeks. Bit Digital also enjoys strategic relationships with leading manufacturers, enabling access to ASICs on advantageous terms.

On October 7, 2021, the company contracted to purchase an additional 10,000 Antminers from Bitmain at an estimated cost of $65 million. These miners are expected to increase Bit Digital’s miner hash rate by approximately 1.0 Exahash (EH/s). With the announced purchases, the company’s maximum total hash rate is expected to be approximately 2.603 EH/s.

Bit Digital has services agreements with its third-party hosting partners in North America. These partners operate specialized mining data centers, where they install and operate the company’s miners and provide IT consulting, maintenance, and repair work on-site. Mining facilities in Texas and Nebraska are maintained by Compute North LLC. Bit Digital’s mining facility in Georgia is maintained by Core Scientific Inc.

Operations

In October 2020, the company commenced migrating its mining assets from China to North America. Following the announcement of the Chinese government’s decision to ban bitcoin mining, Bit Digital immediately suspended its remaining mining operations in mainland China, effective June 21, 2021. Accordingly, the company accelerated its ongoing migration strategy, which commenced in October 2020. As a result, a greater proportion of Bit Digital’s fleet was offline due to miners being in transit to, or awaiting installation in, North America.

As of September 30, 2021, 79.1% of Bit Digital’s fleet was already deployed or awaiting installation in North America, and 20.9% was in transit. During the third quarter of 2021, the company signed two new hosting agreements in the United States, representing 135 megawatts of additional power capacity. Both are expected to be powered by a substantial component of renewable and/or carbon-free energy, contributing to ongoing efforts to decarbonize the company’s mining operations.

During the third quarter of 2021, Bit Digital also purchased 851 miners. As of September 30, 2021, these newly purchased miners had already been deployed in North America. During the quarter, the company sold 4,200 miners that were deemed to have a lower expected return and/or were deemed unsuitable for long-distance migration to North America.

As of September 30, 2021, Bit Digital had 27,744 miners, with a total maximum hash rate of 1.60 EH/S, a decrease from 32,500 miners and 1.92 EH/s as of June 30, 2021.

Market Overview

According to a market analysis report from Grand View Research, the global blockchain technology market was valued at $3.67 billion in 2020. Grand View forecasts the market could expand at a CAGR of 82.4% from 2021 to 2028. That CAGR projects a market worth a whopping $450 billion by 2028.

Grand View points out that blockchain has emerged as a highly promising technology. Blockchain provides an open, immutable, distributed public ledger that can be accessed by several parties involved in a transaction and acts as a universal depository of all transactions between the involved parties.

The increasing worldwide acceptance of cryptocurrencies is one of the major drivers of market growth, Grand View reports. Commercial and central banks across the world are now using blockchain technology for payment processing and issuance of their own digital currencies. The technology enables cross-border payments that are less expensive and faster, as compared to traditional systems.

Management Team

Bryan Bullett is CEO at Bit Digital. He previously served as executive vice president for U.S. affiliates of the company now known as E&P Financial Group. He also was a senior vice president at FBR & Co. During 2011 and 2012, he was vice president at Keefe, Bruyette & Woods. Prior to that, he was a vice president and an associate at Bank of America Merrill Lynch (formerly Banc of America Securities). Between 2004 and 2006, he served as an associate at Deutsche Bank Securities. He holds an MBA from Columbia Business School.

Erke Huang is the CFO at Bit Digital. He is co-founder of Long Soar Technology and has served as founder and CEO of Bitotem Investment since May 2018. Previously, he was investment manager at Guojin Capital, from June 2016 to May 2018. He held the position of engineering analyst at Crowncastle International from March 2013 to November 2014. He has a master’s degree in civil and environmental engineering from Carnegie Mellon University.

Sam V. Tabar is Chief Strategy Officer at Bit Digital. He is co-founder of Fluidity and served as chief strategy officer from April 2017 to June 2020. Prior to that, he was a partner at FullCycle Fund between December 2015 and April 2017. He also has served as director and head of capital strategy (Asia Pacific Region) for Bank of America Merrill Lynch. He was co-head of marketing at Sparx Group from January 2004 to 2010 and, prior to that, an associate at Skadden, Arps, Meagher, Flom LLP & Affiliates. He has a law degree from Columbia University.

Investment Considerations
  • For the quarter ended September 30, 2021, Bit Digital’s revenue from bitcoin mining was $10.4 million.
  • The company’s income from operations was $4.8 million, or $0.09 per ordinary share.
  • During that quarter, Bit Digital earned 248.4 bitcoins.
  • The company has migrated 100% of its miner fleet out of China as of September 30, 2021.
  • Bit Digital owns 27,744 miners, including 851 acquired in the third quarter of 2021.
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