Bitcoin Mining is Getting Harder!

The difficulty of the Bitcoin network surged to 110 trillion, making it harder for miners to produce new blocks. With the increased computation power required, miners had to upgrade their equipment. Riot Platforms managed to overcome these challenges by launching a new mining facility, boosting its production.

Riot Platforms opened a massive new mining facility in Texas, allowing them to ramp up production. CEO Jason Les stated, “The Corsicana Facility reached a hash rate of 15.7 EH/s by the end of the month, and we saw significant improvements in our operational hash rate with newly deployed miners.” Riot’s move stands out as a success in the face of tough market conditions.

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Among the leading miners, Hut 8 saw a 27% drop in production in January, while Mara and Bitfarms experienced decreases of 12.5% and 4.7%, respectively. Miners are taking steps to upgrade infrastructure and improve equipment to handle the rising difficulty.

In the last week of January, Bitcoin mining difficulty decreased to 108 trillion, providing some relief. However, with the Bitcoin network’s high hashrate (832 EH/s) and declining hardware demand, miners are preparing for new strategies that could shape future operations. Miners will adapt their approaches in the coming months based on these developments.

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Worth almost $2.28 million, this deal increases Riot’s total Bitfarms holdings from the previous 84.3 million to 85.3 million shares. Riot currently controls 18.9% of Bitfarms with this acquisition, hence increasing its control over the Canadian mining company.

The purchase symbolizes the most recent evolution in the continuous conflicts among the mining businesses of cryptocurrencies. Riot made an unwelcome $950 million offer to buy Bitfarms in May, which Bitfarms quickly turned down, calling the deal an undervaluation of the business.

Bitfarms responded with a “poison pill” defense to discourage Riot’s possible aggressive takeover efforts, but the Canadian authorities objected.

Riot has kept pressing Bitfarm’s leadership even after retracting its first takeover bid. Riot sought a special shareholder meeting in June to replace several Bitfarms directors with independent candidates.

Still, the boardroom fight seems to be producing outcomes. Bitfarms earlier on Aug. 13 declared the imminent leaving of co-founder and chair Nicolas Bonta, one of the three board members Riot aimed for replacement.

Riot said it will keep looking over its Bitfarms investment and would think about other moves, including changing its stance or suggesting other board composition changes.

Apart from its continuous negotiations with Bitfarms, Riot has made successful acquisitions elsewhere. Riot paid $92.5 million for Block Mining, a Kentucky-based , on July 24. This purchase greatly increases Riot’s hashrate and increases its geographical presence outside Texas in other energy markets.

As consummated on July 23, the Block Mining deal comprised a $18.5 million cash payment plus $74 million in Riot common stock. Apart from that, depending on Block Mining getting more power purchase agreements, a possible earn-out of up to $32.5 million is accessible until 2025.

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Bitfarms’s new CEO, Ben Gagnon, underlined in an August 8 post on social networking platform X the company’s continuous expansion and search of prospects outside of Bitcoin mining. “We continue to dramatically change our operating profile via our ongoing fleet upgrades and our geographic expansion,” he added. “We are also considering expanding into high-performance computing (HPC) and artificial intelligence.”

Revenue and Operational Challenges Amid Expansion

Bitfarms’s overall income of $42 million dropped 16% from the previous quarter and fell short of expert projections even with the strong profits. Following the Bitcoin halved on April 19, the firm blamed lesser block rewards on the income drop. With miners now obtaining 3.125 BTC each mined block, down from the previous 6.25 BTC, this event cut mining payouts by 50%.

The business also revealed running losses of $23.6 million, including $46 million in accelerated depreciation on outdated mining equipment. Bitfarms extracted 614 BTC in the second quarter, worth around $37 million at current market values. But from $27,900 in the first quarter, the whole cash cost of manufacturing climbed sharply to $47,300 per BTC.

Strategic Growth and Future Outlook

Investing over $240 million to improve its mining capacity and add 88,000 additional miners, Bitfarms has been aggressively modernizing its operations. Comparatively to 189 BTC ($11 million) in June, the business stated in July a 34% month-on- month growth in Bitcoin profits, producing 243 BTC ($14 million).

From 6.5 EH/s, the company’s hashrate also experienced a notable rise to 11.1 EH/s. Gagnon pointed out that the new Sharon, PA Bitfarms location will assist to increase the hashrate in 2025 even further. “This site, in combination with our new megawatts in South America, positions Bitfarms to reach over 35 EH/s in 2025, representing 67% growth from our year-end target of 21 EH/s,” he said.

Looking forward, Gagnon underlined that Bitfarms would keep implementing its development plan with an eye on U.S. expansion and diversification outside of Bitcoin mining, therefore enabling ongoing success in the next years.

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Riot Platforms recorded a net loss of $84.4 million in the second quarter, a sharp increase from the $27.4 million loss reported in the same period last year.

The company’s total revenue also declined from $76.7 million to $70 million year-over-year. The decrease in revenue was primarily driven by a $9.7 million decrease in engineering revenue, partially offset by a $6 million increase in Bitcoin mining revenue.

The firm mined 844 Bitcoin in the second quarter, representing a 52% decrease year-over-year. This decline was primarily attributed to the Bitcoin halving and increased network difficulty.

Despite the production decline, Riot nearly doubled its installed hash rate to 22 exahash per second (EH/s) by the end of June. CEO Jason Les stated that the company aims to reach a self-mining hash rate capacity of 36 EH/s by the end of the year.

In addition to its operational updates, Riot Platforms also reiterated its ongoing strategic interest in rival mining firm Bitfarms.

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Bitcoin miner Bitfarms has set October 29, 2024 for a special meeting where its shareholders will vote on reconstituting its board of directors. This decision was made after the meeting requested by Riot Platforms on June 24.

Bitfarms stated that shareholders of record as of September 26, 2024 have the right to vote at the meeting, but they are not required to take any action at this time. A special committee of independent board members reviewed the request with the assistance of financial and legal advisors and unanimously set the meeting and registration date.

As reported last month, Bitfarms shareholders will vote at a special meeting on the dismissal of chairman and interim CEO Nicolas Bonta and board member Andrés Finkielsztain. Bitfarms appointed Ben Gagnon as its new CEO on July 8, but Gagnon is not currently on the board, so he has not been targeted. They will also vote on the removal of Fanny Philip, who filled the vacancy after co-founder Emiliano Grodzki was removed from the board at the shareholders’ annual meeting.

Riot’s three proposed candidates for the board are: John Delaney, a government and public affairs expert with experience in the public and private sectors; Amy Freedman, a corporate governance and capital markets expert with more than 25 years of experience; and Ralph Goehring, a finance and energy expert with extensive public company CFO experience.

In its statement, Bitfarms argued that Riot could bring these issues to the agenda at the company’s annual general meeting on May 31 and did not propose a new corporate strategy for the company. Riot has requested that the registration date be set after a hearing before the Ontario Securities Commission on July 22-23 and is seeking to invalidate the company’s shareholder rights plan.

In June, Bitfarms adopted a “poison pill” approach to prevent a potential acquisition. By September 10, if an entity accumulates more than 15% of Bitfarms’ stake, the company will issue new shares and dilute that entity’s stake. However, after September 10, this threshold increases to 20%.

Riot Platforms attempted to acquire Bitfarms for approximately $950 million in April. Last month, Riot said it was ready to talk with a reconstituted Bitfarms board about a possible acquisition, but withdrew its offer to buy the company for $2.30 per share due to the current board’s lack of meaningful involvement.

Since that deal was blocked, Riot has been steadily buying shares to become the largest shareholder in Bitfarms. As of now, Riot owns approximately 60 million shares, or 14.9%, of Bitfarms.

Riot Platforms’ market cap is $2.7 billion, while Bitfarms’ market cap is around $1 billion.

Bitfarms said in a statement on Friday that it is committed to communicating constructively with its shareholders and hopes that Riot will seek to communicate constructively with the company so that Bitfarms does not have to expend its limited cash resources to protect the interests of its shareholders against Riot’s actions.

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Bitfarms promised earlier this week to dilute its shares if an investor tries to buy more than 15% of the company’s shares. Bitcoin miner Riot Platforms is cracking down on rival Bitfarms’ plans to thwart a possible takeover.

Bitfarms adopted a “poison pill” policy earlier this week, effectively preventing any shareholder from acquiring 15% or more of its shares. The move comes after Riot Platforms announced last week that it plans to increase its 12% stake in Bitfarms; this would enable a hostile takeover of the rival company’s business. On Wednesday, Riot announced that it had purchased nearly 6 million Bitfarms shares on the open market over the past week, increasing its stake to 13.1%. Riot Platforms CEO Jason Les criticized Bitfarms’ defensive strategy on Wednesday.

“Instead of contacting us specifically and in good faith, Bitfarms implemented an off-market Poison Pill with a trigger well below the customary 20% threshold,” Les said in a statement.

Riot attempted to purchase all shares of Bitfarms last month for a total equity value of approximately $950 million. However, Bitfarms rejected this offer. Owning a large enough stake in a company gives an investor certain privileges, such as electing board members and appointing or removing c-level management members. Therefore, it is not uncommon for an investor to deliberately purchase shares to try to direct the company’s operations.

However, a “poison pill” or shareholder rights plan can prevent hostile takeovers. Under such a plan, a firm issues additional shares of stock to dilute an investor’s stake in its business.

The power struggle between Riot and Bitfarms comes at a time of turmoil at Bitfarms. In May, Bitfarms CEO Geoffrey Morphy was ousted over a dispute over the company’s management.

This internal turmoil has fueled Riot’s effort to seize control of its rival, according to the CEO. “We will continue to address serious corporate governance issues at Bitfarms and ensure shareholders have a say in the future of the company,” Les said. Bitfarms stock (symbol BITF) was trading at $2.45, up 7.8% at press time.

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In recent weeks, Riot Platforms has amassed a 12% stake in Bitfarms, aiming to create one of the world’s largest bitcoin miners. According to Reuters, under Bitfarms’ plan, if an entity accumulates more than a 15% stake in Bitfarms after June 20 and until September 10, the company will issue new shares and dilute that entity’s stake. After September 10, this threshold will be relaxed to 20% if certain conditions are met.

Bitfarms stated that this plan, approved by the board, was “to protect the integrity of our previously announced strategic alternatives review process and is in the best interest of shareholders.” A “poison pill,” also known as a shareholder rights plan, is a company’s defense mechanism against an undesirable takeover and attempts to make the company less attractive or monitor the ownership of the takeover target.

Bitfarms rejected a nearly $1 billion takeover offer from Riot Platforms in April. Riot wanted to buy Bitfarms’ existing shares at $2.30 per share, representing a one-month weighted average premium of 24% per share. Bitfarms stated that this offer underestimates the value of the company.

On May 28, Riot purchased a 9.25% stake in Bitfarms, becoming the company’s largest shareholder. Riot purchased an additional 1.5 million shares on June 5, increasing its stake to approximately 12%. Riot plans to call a special meeting of shareholders to add new, independent directors to Bitfarms’ board of directors.

On May 13, Bitfarms fired former CEO Geoffrey Morphy after he filed a $27 million lawsuit for breach of contract, wrongful termination, and aggravated and punitive damages.

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The press statement claims that Riot’s proposition provides Bitfarms’ one-month volume-weighted average share price with a 24% premium. With around US$950 million in total stock value, the purchase seeks to improve Bitfarm’s financial situation and guarantees investors better returns from prospects for future expansion. Riot said it is now the biggest shareholder in Bitfarms, having bought a 9.25% share of the business.

Along with 19.6 EH/s of current self-mining capability and a Bitcoin mining capacity of roughly 1 GW of current power capacity, the merger seeks to reportedly surpass any other publicly traded Bitcoin mining company. The united company is expected to attain up to 1.5 GW of power capacity and 52 EH/s of self-mining capability by year-end.

Originally submitted to Bitfarms on April 22, the board turned down the idea. Riot has partially attributed the comments to the management changes at Bitfarms following the departure of its CEO. The Nasdaq-listed company has chosen to forward the purchase proposition to Bitfarm’s shareholders.

Future Prospects and Strategic Expansion of Riot Platforms’

The mix will produce a business running 15 sites all throughout the United States, Canada, Paraguay, and Argentina. When completely completed, this network with up to 2.2 GW of total power capacity might position Riot Platforms for long-term growth and continuous expansion in suitable energy settings.

The two businesses claim that the proposed transaction—which Riot’s Board of Directors approved unanimously—offers Bitfarms owners a mix of cash and Riot common stock. Riot has access to public equity markets and more than US$700 million in cash on hand.

After a fall in Bitcoin, miners of the metal suffered a major blow last year. Along with declining income reaching monthly lows, mining businesses suffered a total loss of $2.8 billion. With this abrupt collapse, exchange-listed BTC miners and other digital assets suffered greatly in market capitalization; in August last year’s figure dropped to about $3 billion.

This decline particularly affected Riot Platforms and Marathon Digital Holdings, which suffered major capital losses. The chart of the Riot Platforms showed a clear drop, losing almost half of its value from July highs. The corporation gave up a considerable amount of its earnings, even with a 200% increase since last year.

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The investment focuses on acquiring 88,000 highly efficient Bitcoin miners, including models such as Bitmain’s T21 and S21 series. This effort aims to significantly boost Bitfarms’ operational capacity, hash rate, and efficiency. By March 2024, Bitfarms had mined 286 BTC with a monthly operating hash rate of 6.5 exahashes per second (EH/s), showcasing the necessity of increasing hash rate capacity to ensure profitability.

Bitfarms plans to reinvest proceeds from Bitcoin sales into expanding its mining fleet. The transformational upgrade is projected to triple Bitfarms’ hash rate to 21 EH/s, increase targeted operating capacity by 83% to 440 megawatts (MW), and enhance fleet efficiency by 40% to 21 w/TH.

Jeffrey Lucas, Bitfarms’ chief financial officer, emphasized the significance of operational expertise in achieving industry-leading performance and profitability. This investment underscores Bitfarms’ commitment to maintaining competitiveness in the rapidly evolving Bitcoin mining sector.

In a separate development, Texas-based Bitcoin miner Giga Energy has expanded its operations into Argentina, leveraging wasted energy from natural gas flaring in the nation’s oil fields. Giga Energy converts methane released during the gas flaring process into electricity to power its Bitcoin mining rigs. However, the firm anticipates challenges in achieving profitability until all necessary equipment is imported to fully scale its mining operations in the region.

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