Why Do Old-Line Businesses Enter Crypto Mining? Simple: Fat Profits

Even though mining margins have shrunk since crypto prices corrected, for now they’re big enough to keep luring entrants from sectors like prepackaged food and anti-aging formulas.

AccessTimeIconMar 23, 2022 at 3:05 p.m. UTC
Updated Sep 19, 2023 at 4:04 p.m. UTC
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Margins as high as 90%? It doesn’t take a Harvard MBA to know that’s an unusually profitable business model.

Such was the allure of cryptocurrency mining, back when bitcoin and the broader digital asset market hit all-time highs last year, leading many traditional businesses to venture into the mining world in search of juicier returns.

Fast forward to 2022, when miners’ margins have shrunk to 60%-70%, yet old-line businesses continue to enter the sector, as net margins of other industries are still reeling from many macroeconomic factors, including the COVID-19-related downturn. Of course, the margins are based on where the prices of the crypto currencies are going. But for now, they remain lucrative.

This piece is part of CoinDesk's Mining Week.

To take advantage of such currently profitable opportunities, some long-established companies have completely transformed themselves into digital currency miners, while others diversified their legacy business for an extra revenue stream by mining and providing mining-related services.

However, the question is whether these new entrants survive and thrive in this sector. The incumbents think it might be a stretch.

But first, let's examine how these new entrants have done so far with their new ventures.

A total transformation

One of the best examples of complete transition is Nate’s Food, which rebranded itself to NHMD Holdings by transitioning from its original product – premixed pancake and waffle batter in pressurized cans – to bitcoin mining, last year. Prior to the announcement, the company reported no sales in the fiscal quarter that ended Aug. 31, 2021. In the quarter ending Nov. 30, 2021, the company reported $21,204 in revenues from mining, perhaps a glimmer of hope. However, the company was still in the red, as its net loss for the period was $74,565.

Shares of the small company, which is traded on the over-the-counter markets, more than tripled in price last year as bitcoin rallied toward all-time highs around October and November. The shares now have pared almost all of their gains since then, along with those of other crypto miners, and NHMD now trades slightly above the levels of its pre-mining days, according to TradingView data. The company didn’t immediately reply to requests for comments.

Another example of a company completely transforming itself is the Chinese sports lottery firm 500.com, which announced early last year that it would start buying bitcoin miners and subsequently rebranded itself as BIT Mining (BTCM). The company now has 4,800 gigahash per second (GH/s) ether and 825.4 petahash per second (PH/s) bitcoin mining capacity, according to its recent earnings report. However, the stock has fallen about 88% in the last 12 months, according to TradingView data.

And even though the examples are plenty, it would be a missed opportunity not to include Fort Lauderdale, Florida-based anti-inflammatory and antiaging formula manufacturer, Graystone Company (GYST) in this feature. The company announced last year that it would move into bitcoin mining to improve its own financial health and use mining as a “hedge” against its legacy business. The company now plans to bring in 1 EH/s of mining power by 2024 and currently has 2.1 PH/s of mining power, according to its website. Shares of Graystone have also fallen about 27% in the past year.

A sixfold rally

So, a total transformation didn’t really help the above companies, at least based on their share price performance. But what about the companies that kept their core businesses, but added mining as an extra source of income?

The strategy likely helped a Thai information technology company boost its share price more than 500% after it announced plans to diversify into bitcoin mining.

Jasmine Technology Solution, which changed its name from Jasmine Telecom System Public Company, announced its foray into crypto mining on Aug. 10, 2021. At the time, the company cited the economic uncertainty brought by a new wave of COVID-19 cases as the reason to look for new business ventures that could provide a fresh source of income for the company.

It seemed to have worked in Jasmine’s favor, as the shares are now up almost fivefold since the announcement, according to TradingView data. However, the company didn’t generate a large amount of revenue from mining, as its recent presentation shows telecom service accounted for most of its top line in the fourth quarter of 2021.

“We did not transform, but we extended our potential of competency, investment and other aspects such as space, electricity and partners relating to bitcoin mining operation,” a company spokesperson told CoinDesk.

The company saw an opportunity to grow its business into an ever-expanding digital assets market and, given it was already involved in the IT sector, delving into crypto mining came naturally, the spokesperson said. Jasmine already “had a continuous growth with high recurring income and margin” before it entered mining, the representative said.

Jasmine Technology expects that its revenue from bitcoin mining will rise gradually as it gets more mining computers. The company plans to have 500 machines by the first quarter and another 3,000 within this year, while negotiations for more mining rigs are underway. “We perceive that bitcoin mining has a shorter payback period compared to investment in technology and telecommunications infrastructure, and it is a huge market giving us an opportunity to grow further,” Jasmine’s spokesperson said.

Surviving a crypto bear market

Bitcoin mining itself is not an overly complicated industry for new entrants to break into. In fact, anyone can start mining, given lots of different options are now available in the market. However, given mining is a very volatile and cyclical business, staying profitable is the main challenge for any newcomers into the industry.

“I think there are a lot of people who are very good at identifying high-margin businesses,” said Sue Ennis, vice president of corporate development of Hut 8 (HUT), one of the oldest and largest publicly traded crypto mining companies in North America. However, neophytes don’t understand the amount of complexities, including procuring power contracts and managing supply chain constraints, that come with building and operating a crypto mining business successfully, she added.

Lot of these businesses ordered their mining equipment at high prices when bitcoin was trading around $65,000, but now that it's barely catching a bid past $45,000, “how do you protect your balance sheet?” Ennis said. These are some of the questions the new entrants have never wrestled with before, but incumbents like Hut 8 have. Having weathered bear markets is what differentiates the established miners from the new ones, Ennis concluded.

This was echoed by bitcoin miner CleanSpark (CLSK). “There are a lot more barriers to entry than people realize when mining at an industrial scale (as opposed to home mining where barriers are coming down),” said CEO Zach Bradford, adding that it’s not as simple as just “plugging in a machine.”

“The capital requirements are substantial, and operating requirements are considerable —both in terms of new machines, infrastructure and power,” he said. The need for technical expertise also shouldn’t be overlooked, including the need to know and understand global supply chains, electrical and mechanical systems, regulatory frameworks and many other considerations, Bradford added.

Jasmine Technology said it’s coming in with eyes wide open. “There will be more companies diversifying into mining,” said the IT company’s spokesperson, adding that in the past there had been a similar trend of firms diversifying into the clean energy businesses. However, companies that can gain an understanding of the bitcoin mining business and access to the capital markets as well as source mining machines at cheaper prices through partnerships with manufacturers like Bitmain will be able to stick around, the Jasmine rep added.

Crypto mining service providers

There are of course other ways of entering the industry than mining the digital assets directly. For example, Vancouver, British Columbia-based Top Speed Energy provides data centers powered by flared natural gas that would have otherwise burned into the atmosphere to power bitcoin mining operations for customers. The company also uses the heat generated by the mining operations to supply nearby communities.

Top Speed also expects demand for computing power to multiply as metaverse related applications ramp up, which the company plans to service as well, “In the future, the metaverse's demand for computing power will be 10 times that of the present, so in the future we will not only consider mining is such a simple service, and we are also considering the future development of our company and the ability of metaverse development,” Top Speed CEO Ronan Xu told CoinDesk.

'The time has come'

Top Speed is not unique; providing flared gas as a source of power was pioneered by Crusoe Energy and has started to become a more widely used energy source for digital asset mining. Most recently, ConocoPhillips (COP), the giant oil and gas exploration and production company, said that it was routing excess natural gas from one of its Bakken region projects in North Dakota to supply power to a bitcoin (BTC) mining operation.

Given the explosive growth in the mining sector, “the time has come” for traditional enterprises to get a piece of the action, Xu said. “The digital currency mining industry chain is exceptionally long, including upstream wafers, software services, hardware services, energy services and follow-up transaction services, as well as new custody generated by future compliance supervision,” the CEO added.

Perhaps it would better suit non-crypto native businesses to service these subsectors of the mining industry, rather than start mining digital assets themselves. Such an approach might hedge them against the industry’s ups and downs and provide indirect exposure to mining at the same time.

After all, it’s often said that during the California gold rush of the mid-19th century, the merchants selling supplies to miners typically prospered more than the miners themselves.

Further reading from CoinDesk’s Mining Week

Cities across the U.S. are grappling with what it means to have cryptocurrency mining operations in their communities. Plattsburgh offers a sobering case study.

Despite favorable business conditions, a country’s political environment can deter international capital.

CoinDesk reporters traveled across Europe, Asia and North America to capture the diversity of cryptocurrency mining facilities.


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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Aoyon Ashraf

Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets

Eliza Gkritsi

Eliza Gkritsi is a CoinDesk contributor focused on the intersection of crypto and AI.

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