Hive Digital strengthens its reserve strategy in Bitcoin to reduce dependence on debt and equity dilution. The company is taking advantage of the recent market bear to expand its mining operations and acquire new facilities.
This approach reflects a growing trend among public miners, increasingly oriented towards the conservation of mined cryptocurrencies rather than their immediate sale.
Hive Digital: a long-term strategy with Bitcoin to face volatility
According to Darcy Daubaras, CFO of Hive Digital, the company continues to focus on a conservation strategy for Bitcoin (HODL). The goal is to retain a significant portion of the mined BTC to benefit in the event of an increase in their value.
This policy allows the company to better manage liquidity, especially during periods of strong bear markets, like the recent 30% drop in Bitcoin.
Daubaras emphasized that this choice is preferable to the heavy use of debt or the dilution of shares to finance operations, a common practice in the mining industry.
Several public miners have increased their use of stock dilution, issuing new shares to raise capital. This strategy has been reinforced due to the rise in interest rates and the reduction in credit availability.
In the absence of other options, many companies are forced to quickly sell the mined Bitcoin to cover operational costs and finance expansion.
Despite the commitment to an accumulation strategy, Hive Digital does not rule out the sale of Bitcoin when necessary. The company has already sold part of its reserves to finance the acquisition of a 200 megawatt Bitfarms plant in Paraguay.
However, according to Daubaras, selling Bitcoin selectively to finance strategic investments represents the best compromise between business growth and long-term sustainability.
At the end of the fourth quarter of 2024, Hive expanded its reserve of BTC to 2,805 Bitcoin.
Diversification to face market challenges
During bull market periods, miners can accumulate Bitcoin more easily.
However, to ensure success in the long term, it is essential to address issues such as price volatility, increasing competition, and rising energy and hardware costs.
To counter these difficulties, Hive Digital has rethought its business model by including data centers for artificial intelligence (AI) and systems based on renewable energy.
In September 2023, Hive announced that it had repurposed part of its Nvidia GPUs to perform tasks related to artificial intelligence.
This change allows the company to generate over 2 dollars per hour per GPU, compared to just 0.12 dollars per hour produced by mining criptovalute.
Other mining companies are also adopting similar strategies to diversify revenue sources. Among these are Core Scientific, Hut 8, and Bit Digital, which have followed Hive’s example to improve their economic sustainability.
A report published by CoinShares in October 2023 highlighted that the lower profitability of Bitcoin mining is pushing companies to explore new opportunities, such as artificial intelligence.
The study suggests that diversification represents a possible solution to reduce the risks associated with the volatility of cryptocurrencies.
Another analysis, released in January 2024 by Digital Mining Solutions and BitcoinMiningStock.io, confirmed the importance of diversification.
The report highlighted how the adoption of high-performance technologies and the use of artificial intelligence can ensure more predictable revenues compared to traditional mining activity.
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Conclusion
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The strategy of Hive Digital to hold Bitcoin for the long term reflects a transformation in the mining sector. Avoiding excessive use of debt and stock dilutions can ensure greater financial stability for companies in the sector.
Furthermore, the shift towards artificial intelligence solutions and sustainable energy sources is proving to be a strategic move to tackle the challenges of an increasingly competitive sector.
If this trend continues, cryptocurrency mining could evolve into a more solid and diversified business model.
