Hut 8 Mining (TSX:HUT) is a Canadian cryptocurrency mining company that has been in operation since 2018. The company’s name is a nod to Alan Turing whose efforts in codebreaking formed the precursor to blockchain technology as we know it today.
The company went public five years back. Since then, Hut 8 stock has been increasingly being talked about in investing circles. The company has a lot going for it including a diversified range of income streams to protect shareholder value. Apart from mining, the company also offers white-hat web computing hosting services as well as income programs leveraging the Bitcoin it has in reserves.
Hut 8 Mining is the largest cryptocurrency miner in the world with an estimated capacity of 209 MW. The company also claims to be environmentally sustainable by using as much renewable energy to mine Bitcoin as it can.
Hut 8 has been doing quite well since it went public a few months ago, but what are the company’s long-term prospects?
Hut 8 Mining’s stock performance is directly related to Bitcoin
Even though Hut 8 has hedged its bets by offering multiple services, it is primarily a Bitcoin mining company. This means that the fate of the company depends largely on how well Bitcoin, or the cryptocurrency market as a whole, is performing.
Any jump in the value of Bitcoin is directly good for the company and vice versa. This fact makes the company a relatively risky bet in a nascent industry. Cryptocurrency, even though it is touted to be the future, is still in its nascency. Some vendors are starting to accept cryptocurrencies as a form of payment, but it remains to be seen how governments around the world will regulate the industry.
Currently, the entire industry is operating in a legal lacuna due to the absence of official legislation concerning the matter.
Hence, you should be bullish on Hut 8 Mining only if you’re bullish on Bitcoin as a whole.
Healthy financials for Hut 8 Mining
Hut 8 Mining is doing incredibly well financially, especially considering that it is such a new company. Investors should note it is already profitable. During the second-quarter earnings release, the company reported an operating profit of $6.5 million.
In addition to profit, the company is also doing well in terms of revenue. Its top-line quadrupled over the past year. In the second quarter, it reported revenues of $27 million.
The management is also bullish on the company’s future financial prospects and declared that they expected to see an increase in revenue in Q3 and Q4 as well.
Further, the company is working on increasing its bitcoin mining capacity, which could be very healthy for the company’s balance sheet. It expects to reach 22 bitcoins per day by Q4. Hut 8 already has more than 4,000 bitcoins on its balance sheet currently valued at over US$185 million.
Overall, Hut 8 Mining seems like a good but risky bet. Even though the company has been doing well over the past couple of years, that may only be because the cryptocurrency market has experienced a bullish run. On the flipside Hut 8 Mining is too dependant on an untested industry, hence, invest with caution.