crypto strategy

Crypto billionaire Jihan Wu aims to raise $200 million to buy assets from struggling Bitcoin miners

Digital mining company Bitdeer Technologies Holdings, led by crypto billionaire Jihan Wu, is trying to raise $200 million from outside investors to buy discounted hardware despite strong headwinds for the mining industry and frosty outlook of Wall Street.

Wu is the co-founder of the world’s largest computer chip company for bitcoin mining, Bitmain. After settling a long disagreement with fellow co-founder Micree Zhan, Wu took control of spin-off Bitdeer. The company will begin its acquisition plans with an investment of $50 million and aims to raise an additional $200 million from outside investors such as family offices, venture capital firms and investment funds, such as reported it Bloomberg.

Raising funds for crypto mining is an ambitious – perhaps audacious – goal given the declining interest in businesses from traditional financial players. In 2021, the list of publicly traded mining companies was growing rapidly, ending the year with 16 deals on the Nasdaq. Today, the top three publicly traded mining companies by market cap – Marathon, Riot and Core Scientific – are down 70%, 69% and 87% year-to-date, respectively.

Bitcoin
BTC
Mining is an expensive business requiring large amounts of computing power to be the first to solve complex mathematical problems and earn the opportunity to process a transaction for the network and earn payment in bitcoins. Mining operations occur where electricity is cheap and the price of bitcoin is high. This makes it easier to earn profits by processing transactions for the network, earning bitcoin rewards. Bitdeer has mining operations in the United States and Norway.

Last year, when the price of bitcoin hit its all-time high, miners adopted aggressive growth strategies and ordered more mining machines. However, these units usually take at least six months to arrive and are repaid in three installments. With bitcoin down 56% year-to-date and the cost of electricity rising globally, mining margins have shrunk and many miners lack the cash to complete their contracts .

“It’s the last payment that’s most important, because a lot of these companies have used all their money to pay the first and second installments, but when the final payment comes due, they’re out of money.” , DA Davidson says analyst Chris Brendler. “It’s very attractive for buyers to come in and say ‘hey, I’m going to buy this contract, don’t let it default. “”

A metric called hash price captures daily revenue per unit of mining horsepower. The hash price has fallen over 57% since last year, driving down the value of bitcoin mining machines. Falling hash prices, rising energy costs and the rampant sale of machines suggest that the value of these computers has fallen further. At the same time, selling machines provides these well-capitalized companies with efficient mining infrastructure (read: power purchase agreements) in place an opportunity for growth as the market consolidates.

“There’s downside protection for these companies in the form of declining competition, and it’s not just that electricity costs have gone up and the price of bitcoin has gone down, it’s also that third element of capital markets, you can’t raise money to build a bitcoin operation today,” Brendler says. “You can try if you’re Bitdeer, but it’s pretty hard to get investors to do that. today.”

CleanSpark is another example of a bitcoin miner looking to capitalize on equipment available at lower cost. Between August and September, CleanSpark acquired two mining facilities in Georgia from Mawson Infrastructure Group and Waha Technologies. The combined value of the acquisitions was $67.6 million.

Bitdeer requested to go public through an agreement with a special purpose acquisition company (SPAC) called Blue Safari Group Acquisition Corp. in November 2021, but the deal has since been pushed back twice with the new appointment for December 14. Despite the setbacks, Blue Safari’s price has steadily risen since the start of the year, which seems counter-intuitive in a market that has broken down on SPACs and is shaking during a crypto winter. At the time of writing, Blue Safari is trading at $10.26 and is up 3% year-to-date.

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