Bitcoin Mining Deep Dive with CleanSpark CEO Zach Bradford



KEY POINTS
  • We sat down with CleanSpark’s CEO, Zach Bradford, to take a deep dive into the company’s Bitcoin mining operations.
  • CleanSpark and the recent partnership with Coinmint are focused on the eco-friendly mining of bitcoin, using approximately 94% carbon-free energy today. The companies also intend to expand their green initiatives with aspirations for 100% carbon-free mining at the New York facilities.
  • With Coinmint, CleanSpark will bring additional bitcoin mining capacity online and should help the company increase its overall hashrate capacity to its goals of 1.2 EH/s.
  • CleanSpark will utilize Coinmint’s available miners immediately while its ATL facility continues to undergo its 30 MW expansion to 50 MW of capacity. CleanSpark expects ~900 S19 miners to operate, representing 90-100 PH/s instantly being added to its previous production capacity of 470 PH/s (>4 bitcoins pr day). CleanSpark’s year-end target is ~2.0 EH/s.
  • The company believes recent industry events, specifically the mass exodus of Chinese miners, have contributed to lower mining difficulty rates and increased yield, creating a favorable backdrop for bitcoin mining companies.
  • China’s bitcoin ban is expected to be a positive catalyst for CleanSpark and the bitcoin mining industry outside of China. The company stated this has decreased mining difficulty by 28%, translating into a 28% top-line improvement for existing miners and direct flow-through to profitability as production costs remain unchanged. CleanSpark expects difficulty rates to fall another 8-10% over the next couple of weeks.
  • The company anticipates that it will take 12-16 months before this lost capacity comes back online as Chinese miners relocate to new markets. Additionally, CleanSpark estimates that 30% of the prior hashrate will not come back online since it was related to outdated machines that were reliant on abnormally low power prices in China (sub-$0.01).
  • Our prior content on CleanSpark can be accessed here.
OUR INSIGHTS

The Opportunities

The market for microgrids is in a long-term secular growth trend, and CleanSpark is well-positioned to capitalize on this as it offers a differentiated, vendor agnostic software and hardware solution that provides significant ROI for customers. Additionally, CleanSpark is focused on scaling its bitcoin mining operation using ~100% low carbon energy and believes this business can contribute $30-40 million in revenue in FY21 and over $325 million in annualized revenue by September 2022. Currently, CleanSpark contributes ~1% of the global bitcoin capacity.

The Obstacles

The company is a smaller player in an industry dominated by much larger, well-capitalized competitors. CleanSpark has proven its ability to compete effectively but will need to continue to expand its sales network and ensure its technology-agnostic software platform evolves with the industry. On the bitcoin side of the equation, an increase in mining difficulty rates would reduce the company’s bitcoin yield and associated revenue, and bitcoin price fluctuations would impact the profitability of the operation.

We sat down with CleanSpark’s CEO, Zach Bradford, to take a deep dive into the company’s Bitcoin mining operations.

EXECUTIVE DISCUSSION

Executive in Focus: Zach Bradford served as the company's CFO from 2014 through October 2019 at which time he was named CEO. Mr. Bradford holds a BS in Accounting and a Masters of Accountancy from Southern Utah University. He is a licensed CPA in Nevada, a Chartered Global Management Accountant, and a member of the American Institute of Certified Public Accountants. His experience includes serving as a partner in a public accounting and consulting firm. From March 2015 to July 2016, Mr. Bradford also served as a member of the Board of Directors and CFO of Epic Stores Corp.

Shawn Severson: Today, we have Zach Bradford with us. We’re going to do a deep-dive on the bitcoin mining space. As of the 3Q21 earnings call, your hashrate stood at 820 PH/s, or approximately 6-7 bitcoins per day. This is about double your hashrate from the end of June. What drove that impressive growth? And what does it mean in terms of dollars and margins for...

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