It’s no secret that the bitcoin bear market is bad right now. By some metrics, this is one of the worst downturns in Bitcoin’s young history. And few sectors of the Bitcoin economy are as hard hit by current market conditions as miners. But bear markets happen precisely when mining winners are separated from losers: agile, smart teams build and survive while over-leveraged, unprepared teams fall prey to an adverse environment.
One company that has continued to grow, acquire, and expand in the bear market is CleanSpark, a publicly traded bitcoin mining company based in Nevada. This article highlights some of the actions taken by this team over the past few months, contextualized with a bit of the brutal state of the mining market, making the planning and execution of CleanSpark all the more impressive and remarkable.
Before proceeding, it is important to note that this article is for educational purposes only. The author has compiled this information and analysis to share as market commentary, not advice. The author also does not own any shares of CleanSpark or any other form of personal financial investment in the company.
The Bitcoin Mining Bear Market
Bitcoin price is down about 70% from its all-time highs. The hash price – the dollar value of each unit of hash rate – is rapidly approaching all-time lows. Almost every week, a new headline appears on lawsuits, bankruptcies and more bankruptcies in the mining sector. Miners are struggling to stay operational, let alone outperform bitcoin. Almost regardless of what data anyone is looking at, the current bear market is messy and definitely not fun.
Despite all of this, the CleanSpark team continues to grow, buy, and build, as the next section explains. Priced in bitcoins, CleanSpark shares are still slightly above their start-of-year level, according to data from TradingView, despite ongoing market turbulence — not bad for a bear market.
CleanSpark Bear Market Movements
Many mining companies act as “press release heroes” by announcing and planning for growth, but often failing to execute on time or at all. But since its first foray into mining in December 2020, CleanSpark has grown to 100 employees and 3 exahashes (EH) of online hash rate, with hash rate tripling in the past year alone.
CleanSpark has also made sustained purchases for mining hardware even as market conditions have deteriorated – or perhaps because of it. The company purchased 4,500 Antminer S19s last October and another 2,597 the following month. In June, he bought purchase contracts for 1,800 Antminer S19 XP. In July, the company recovered 1,060 Whatsminer M30S. In August, he purchased an additional 3,400 Antminer S19s, followed by an additional 10,000 Antminer S19j Pros in September.
CleanSpark has also secured new deals, partnerships and acquisitions nearly every month this year, including $35 million in new funding (April), a partnership with TMGcore (June), a co-location deal with Coinmint (July), an 86 megawatt (MW) acquisition of mining facilities in Georgia (August) and acquisition of a turnkey mining site from Mawson (September).
And amid all this growth, the company’s healthy finances set it apart for having one of the lowest debt ratios throughout the public mining sector. Jaran Mellerud, mining analyst at Arcane Research, said from the company: “The combination of quality and low valuation of CleanSpark makes it one of the most attractive Bitcoin mining stocks going forward.”
A brief history of CleanSpark
CleanSpark represents a unique type of mining company unlike most other teams in this sector of the bitcoin market, namely an energy company that has become a mining company. Founded in 1987 as a software and energy company, CleanSpark only started monitoring the mining industry in the last two years. According to Matthew Schultz, executive chairman of CleanSpark, the company has been doing its due diligence on the mining sector throughout 2020 and has seen the string of high profile bitcoin investments from Square, Tesla and MicroStrategy as “further validation” of the legitimacy of the industry. And in early August, it completed its transition from energy to mining by selling its remaining energy assets to “focus entirely on bitcoin mining.”
This transition gives CleanSpark a unique perspective on the market and something of an advantage for other mining companies merging or partnering with the energy industry. For example, CleanSpark is well aware of the hurdles facing partnerships and negotiations between the two industries, as CEO Zach Bradford said during a mining panel at the Bitcoin 2022 conference in Miami.
“No one knows how to rate that much power for a consistent load,” Bradford said, referring to the hurdles miners face when structuring deals with power companies.
The end of the bear market
Anyone can guess when the bear market will be over. Miners and everyone else in the bitcoin market could live an even longer and more painful time. But mining companies are already shedding during the market downturn to prepare and capitalize on opportunities in a depressed market. Bull markets are times of celebration for all the effort invested in growth during bear markets. Winners are truly created during bear markets, and that’s no more true for any industry than bitcoin mining.
Based on its journey so far, it looks like CleanSpark has emerged as a winner.
This is a guest post by Zack Voell. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.