The US-based company Bitwise announced its application to the SEC for a new fund called the Bitcoin Standard Corporations ETF. This fund aims to track the stock performance of companies that hold at least 1,000 BTC in their corporate reserves.

Bitwise’s new ETF will invest in companies meeting specific criteria. Eligible companies must have a market capitalization of at least $100 million, a daily average trading volume of at least $1 million, and a public float percentage below 10%.

Nate Geraci, President of ETF Store, shared a list on his X account of companies holding at least 1,000 BTC. The list is led by MicroStrategy, followed by Marathon Digital, Riot, Hut8, Tesla, and Coinbase.

Marathon Digital CEO Fred Thiel, whose company holds over 44,000 BTC, stated, “I believe MARA should be included in this ETF.”

Simon Gerovich, CEO of Metaplanet, also highlighted his company’s eligibility, saying, “Metaplanet is a Bitcoin standard company with at least 1,000 BTC in its corporate reserves.”

Nate Geraci’s tweet on the Bitwise Bitcoin ETF:

Bitwise’s application for the Bitcoin Standard Corporations ETF reflects the growing interest in institutional-level Bitcoin investments and efforts to make such investments more accessible. This type of ETF offers investors the opportunity to benefit from the performance of major companies holding Bitcoin, while also enhancing market transparency and encouraging greater institutional participation.

This initiative has the potential to attract interest from both key players in the crypto sector and traditional investors, further solidifying Bitcoin’s position within the financial ecosystem.

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In its latest report, JPMorgan highlighted that price targets for leading mining companies, including MARA Holdings (MARA), CleanSpark (CLSK), Riot Platforms (RIOT), and IREN (IREN), have been increased. These stocks are currently trading near or above their revised targets.

Expanded Evaluation Criteria for Bitcoin Miners

Previously, JPMorgan evaluated Bitcoin miners based on their four-year gross profit potential. Now, analysts have expanded their framework to include:

• The value of the companies’ land and energy assets.
• Premiums for holding Bitcoin reserves (HODL).

HODL Premium: The Advantage of Bitcoin Reserves

JPMorgan analysts noted that MicroStrategy, due to its significant BTC holdings, trades at approximately 2.4x its market value. With around $40 billion in Bitcoin reserves, MicroStrategy is a leader in this space.

Leading Bitcoin mining companies and their BTC reserves include:

• Marathon: $3.9 billion
• Riot: $1.1 billion
• CleanSpark: $890 million

Growing interest in BTC reserves has led to increased valuations in public markets. According to JPMorgan, total Bitcoin reserves on corporate balance sheets now exceed $53 billion.

Valuation of Land and Energy Assets

The second quarter of 2024 marked a pivotal period for Bitcoin miners. The April Bitcoin block reward halving reduced rewards from 6.25 BTC to 3.125 BTC, squeezing profit margins for miners.

In response, cash-rich companies like Riot Platforms and CleanSpark acquired turnkey mining facilities to increase hash rates in the short term. JPMorgan estimates Riot’s energy portfolio is worth approximately $1.3 billion.

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The mining company, Riot Platforms, stated in its latest annual report that the ongoing chip shortage, the need to continuously increase the hash rate, and deepening environmentally friendly policies in the USA could potentially affect the company’s balance sheet.

Riot, as one of many Bitcoin mining firms preparing for the upcoming halving event, highlighted more than 13 major risks related to the future profitability of Bitcoin mining in its annual 10-K file dated 23rd February, which included the risk factor disclosures section.

One of the risk factors emphasized by Riot was the ongoing global chip crisis, due to the limited number of manufacturers capable of producing the highly customized ASIC chips used in mining.

“The ongoing global supply chain crisis, combined with increased demand for computer chips, has created a shortage in semiconductors,” Riot indicated that this situation could impact mining operations in the long term.

In December, Riot agreed to purchase 66,560 miners worth $291 million from the manufacturer MicroBT. According to the company’s CEO, Jason Les, this was the “largest hash rate order” in the company’s history.

In Riot’s latest annual report, it indicated that the costs of procuring and setting up mining machines will continue to be “higher than normal” until the chip shortage crisis is resolved.

However, as Riot indicated, even if ASIC miners have access, they may still encounter “design flaws”.

The company stated that they had software and firmware problems in the past when trying to adapt their miners to work in “liquid-cooled” environments and they might face similar problems in the future.

In the meantime, Riot noted a risk from an increasingly competitive industry. This means that as the global hash rate increases, the company needs to continue increasing its hash rate to maintain its market share.

“To be competitive in this highly competitive industry, we believe we must continue to acquire new miners to renew miners lost due to ordinary wear and tear and other damage, and to increase our hash rate, so we can cope with the growing global network hash rate.”

In the meantime, Riot indicated that Bitcoin faces “significant scaling barriers” that could hinder its ability to become a widespread payment method.

Riot indicated that “demand for Bitcoin could stagnate or decrease,” which could negatively impact the price of Bitcoin and thus weaken Riot’s balance sheet.

$RIOT True Cost of Mining: $23,268

Not going to do a full $RIOT write up tonight, but wanted to share what I’m seeing as their True Cost of Mining based on their 10-K results for the full 2023 year.

The only major nuance I will share right now from my adjustments shown below is… pic.twitter.com/gSWYO6AIUr

— Ben Werkman (@BenWerkman) February 24, 2024

“An increasingly climate change-friendly policy in Texas and the United States governments could also pose challenges for the company,” it said.

“New laws and increasing regulations related to climate change could bring significant costs for both us and our suppliers. These costs could include increased energy needs, investment in capital equipment, environmental monitoring and reporting, as well as other costs necessary to comply with such regulations.”

Riot indicated that it could lose its competitive edge if subjected to more stringent regulations compared to its counterparts in other regions.

Riot and the Texas Blockchain Council (TBC) received a favorable decision from a United States District Judge for a lawsuit filed against several US energy officials who allegedly requested invasive data collection from crypto miners.

Meanwhile, Riot mined a total of 6,626 BTC in 2023, increasing Bitcoin production by 19%, which was worth $341.4 million at current prices.

The company’s average cost for Bitcoin mining in 2023 also decreased by 33% to $7,539.

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US House Speaker: Bitcoin ETF Approvals Are a Historic Turning Point

Phoenix Group, the rising star of Bitcoin mining in recent times, signed an important agreement with Bitmain, the device manufacturer. The agreement included a purchase of $187 million worth of devices.

So What About Cooling?

Only the purchases were mentioned and no information was shared about the brand or how the devices were. It is known that the company uses devices that are powered by water immersion and attaches importance to renewable energy.

Phoenix company had reached an agreement in recent months to establish a $300 million Bitcoin mining farm in Saudi Arabia and Oman.

Phoenix Group, which closely follows blockchain technologies and takes various steps in this regard, also made its company shares public in December. It was stated that there was 33 times more demand for the company’s shares, which started trading on the Abu Dhabi Stock Exchange at that time, than expected.

Cleanspark, a Bitcoin mining company based in the United States, recently made an agreement with Bitmain for $90 million and also reached a preliminary agreement for a future purchase of $100 million.

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