Bitfarms began trading on Nasdaq and tells how publicly traded Bitcoin-exposed institutions have a different risk portfolio than miners.
Canadian Bitcoin mining company Bitfarms began trading on Nasdaq yesterday under the ticker symbol BITF.
BTIF opened at $4.04 per share and reached a high of $4.11, and at the close of the day at $3.96.
The company was founded in 2017 and uses “over 99%” of hydro-renewable electricity to mine Bitcoin in five facilities in Québec.
The company has been listed on the Growth Enterprise Market of the Toronto Stock Exchange in Canada, with a trading price of US$4.25 per share. It will retain dual listings.
Despite the bear market, Bitfarms CEO Emiliano Grodzki told Decrypt that the mining business is more resistant to bear market volatility than non-mining companies that have a large number of bitcoins on their balance sheets.
“If Bitcoin went down to $16,000, we’d still continue to make a huge amount of money,” Grodzki said.
He explained that institutions that buy bitcoin at higher prices are now unfavourable for the investment, but Nasdaq investors need to understand that exposure to bitcoin is a different game for miners.
Like all miners, Bitfarms, can obtain Bitcoin at a very small cost regardless of market conditions. This is because the company is making money rather than buying, which means that the cost of acquiring bitcoin is relatively fixed.
The fluctuations in rents, employee salaries, mining machines, and electricity are not as large as the price of cryptocurrencies.
Grodzki said that in the first quarter of this year, Bitfarms purchased one Bitcoin at a cost of $8,400, meanwhile at this time institutions purchased one bitcoin at a spot market price of about $50,000.
Bitfarms continues to add approximately 8 bitcoins to its inventory every day. Bitfarms is the second Canadian mining company listed on the Nasdaq after Alberta-based Hut 8 last week.
Hive, another Canadian mining company, announced on June 18 that it had been approved to be listed on the Nasdaq.
Different from Hut 8, which now also mines Ethereum, Bitfarms has no plans to diversify its mining business.
“I honestly don’t understand why you’d want to diversify away from Bitcoin mining when it’s one of the most profitable periods we’ve ever had, It’s usually a weird strategy to adopt this in the growth phase. It’s something that applies at the end of the growth phase, not at the beginning.” Ben Gagnon, chief mining officer, told Decrypt.
Gagnon explained that there are only four variables to judge a publicly traded miner: hashrate and the daily Bitcoin production rate, cost to produce Bitcoin, amount of Bitcoin on the balance sheet, and amount of hashrate coming in the future.
In terms of ” market cap-to-hashrate”, Bitfarms is considered one of the most undervalued listed mining companies inNorth America, according to a corporate presentation in June 2021.
The chart below shows that although Bitfarms’ hash rate is approximately 4.5 times that of Hive, it is less than a quarter of the latter’s market value.
Riot, an American mining company with a lower hash rate than Bitfarms, is currently trading at $31.57 on Nasdaq, which is a far cry from Bitfarms’s $4.85 per share on the Canadian TSX Venture Exchange.
When comparing this analysis, it suggests that mining companies are better valued in the U.S. and therefore trade at a premium compared to Canada. Gagnon said, but this may be due to tax or judicial reasons, or it may just be a sign of market immaturity.
“But there’s a very clear arbitrage opportunity between the two markets,” he said.
Therefore, it is believed that the value of Bitfarms on Wall Street in New York will be much higher than on Bay Street in Toronto. If Bitfarms can achieve better valuation, it also means better access to the capital market.
The company’s cheaper capital will also come in handy, as Bitfarms plans to add a sixth facility in Québec, one in Argentina, and further expansion in Latin America. In the next few years.
CEO Grodzki believes that Latin America may become the next China for Bitcoin mining. But he admits that as an Argentine, he may be a bit biased.
