A few months ago I wrote a note paper HIVE Blockchain Technologies Ltd (NASDAQ:hive), highlighting several red flags in the company’s fourth-quarter 2022 earnings call. I was particularly worried about HIVE. ethereum (ETH-US Dollar) mining equipment may become obsolete due to the pending transition to “Proof of Stake” (“POS”) systems. He was also worried about HIVE’s mining profit margin, as he was mining with a negative gross margin in Q4 2022. Since my article, HIVE has decreased by more than 30% of his.
After reviewing HIVE’s monthly production report and the latest figures from cryptocurrency prices, I continue to advise investors to stay away. It looks like the rate is negative and doesn’t even cover the electricity bill. The loss of Ethereum mining has hit HIVE hard. Combined with Bitcoin increase (BTC-US Dollar) Due to mining difficulties, HIVE’s monthly BTC production decreased by 40% from August to October, despite ASIC increasing by 7%.
Ethereum Merger and Impact on HIVE
When I wrote my first article, there was still quite a bit of skepticism about the pending Ethereum to POS conversion. In fact, HIVE itself has downplayed timelines and implications, with the company teasing a significant delay in the transition in his Q3/F22 presentation (Fig. 1).
Unfortunately for HIVE and other Ethereum miners who have earned their income from proof of work on the Ethereum network, successfully merged We migrated to a POS system on September 15, 2022.The merger has made Ethereum’s mining equipment obsolete and many GPUs are selling below MSRP and fixed price.
As a reminder, HIVE has 6.49 TeraHash Ethereum mining capacity at the end of August generated 3,010 ETH (equivalent to 228.4 BTC according to HIVE).HIVE also mined 290.4 BTC in August using dedicated ASIC miners, so in total, the company has 518.8 BTC equivalent. produced.
In response to the Ethereum merge, HIVE commented The company plans to transform its business to focus on Bitcoin, including digital financial assets (i.e. no more HODL ETH). Since the integration, HIVE’s revenue from GPU mining has dropped dramatically from 7 BTC/day to 1.6 BTC/day as GPUs have been converted to altcoin mining.
In September, the transition month, HIVE mined 268.9 BTC, 1,394 ETH (equivalent to 111.6 BTC) from ASIC mining, and 15.8 BTC from GPU mining of altcoins, for a total of 396.3 BTC.
of Octoberin the first month of BTC-only mining, HIVE mined 262 BTC from ASIC mining and 45 BTC from GPU mining, totaling 307 BTC.
Thus, as a result of the Ethereum merger, HIVE’s BTC equivalent mining output has fallen by more than 40% from 519 BTC in August to 307 BTC in October.
Bitcoin’s difficulty continues to rise. HIVE running on a treadmill
Compounding HIVE’s problems with Ethereum, Bitcoin mining difficulty has continued to rise, with the price of Bitcoin recently hitting new all-time highs despite falling ( Figure 2).
So, even though HIVE continued to add ASIC mining rigs and the ASIC hashrate increased by 7% from 2.23 Exahash in August to 2.38 Exahash in October, the number of BTC mined from ASIC mining was actually fell 10% to 262 BTC from 290 BTC in August. October.
What are HIVE’s current margins?
Reconsidering my concerns about HIVE’s margin profile, I was certainly too bearish in my previous article when I pointed out that HIVE was mining with a negative gross margin in Q4 2022.first quarter result As reported in August, Gross Mining Margin increased QoQ to 61% as operating and maintenance costs slightly normalized to $17.2 million. But HIVE’s gross margin, including mining equipment depreciation, was just 3% in Q1/F23, so I was on the right track (Figure 3).
Is the total mining margin currently zero?
Stay tuned, we are at an interesting juncture. On November 9th, Bitcoin plummeted to around $17,000 as he one of the industry’s seemingly ‘unruly’ FTX. Forced to seek bailout from arch-rival Binance.
Interestingly, assuming normal operating and maintenance costs for HIVE’s Q1/F23, the mining cost per day would be ~$190,000 ($17.2 million for 91 days). From the October product update, we also know:
As of November 2nd, HIVE is producing an average of over 9.5 Bitcoins per day from ASIC and GPU production. This consists of at least 8 Bitcoins per day from the ASIC fleet and at least 1 Bitcoin per day from the GPU fleet.
Generously, even assuming HIVE generates 10 BTC per day, at the current Bitcoin price, HIVE is only generating $170,000 in revenue per day (10 BTC x $17,000 / BTC).
Therefore, it is very likely that HIVE is currently mining. negative gross mining profitThis means that mining earnings cannot even cover electricity bills.
Risk to bearish view
Clearly, the biggest risk to my bearish view is cryptocurrency prices. In August, following my last article, HIVE briefly topped his $7 per share. However, in the long run, HIVE is mining with a negative gross mining profit margin at current cryptocurrency prices, so basically its mining equipment could be wasting energy and money. I don’t think you can escape the reality that there is.
In summary, I remain wary of HIVE. At current cryptocurrency prices, HIVE appears to have a negative mining gross profit margin. The loss of Ethereum mining has hit HIVE hard. Coupled with the rising difficulty of BTC, HIVE’s monthly BTC output fell by 40% from August to October, while ASIC increased by 7%.