In a strategic maneuver to bolster its Bitcoin mining capabilities, CleanSpark Inc., a prominent player in the cryptocurrency mining landscape, has announced a substantial investment in new mining hardware.
The company has inked a deal with Bitmain, the leading manufacturer of cryptocurrency mining equipment, to purchase up to 160,000 S21 miners, a move that could potentially quintuple its current hashrate.
Today we announced the purchase of 60,000 Bitmain S21 units with delivery expected April through June 2024. The agreement also includes a strategic call option to purchase an additional 100,000 machines at a fixed price of $16.00 per terahash until the end of the calendar year.… pic.twitter.com/LDwHT9ERM1
— CleanSpark Inc. (@CleanSpark_Inc) January 8, 2024
A Strategic Expansion
CleanSpark has committed an initial $193.2 million for 60,000 Bitmain S21 miners, with the option to acquire an additional 100,000 miners at a fixed rate of $18 per terahash per second (TH/s) over the next year. This preemptive measure is a calculated response to the anticipated Bitcoin halving event, which traditionally impacts miner profitability by slashing the block reward by half.
The company’s CEO, Zachary Bradford, underscored the significance of this expansion, stating, “This is more than growth; it’s about ensuring operational efficiency and embracing market opportunities.” Bradford’s comments highlight CleanSpark’s confidence in Bitcoin’s future and its commitment to capitalizing on the market’s dynamics.
Preparing for the Halving
Bitcoin’s halving event, expected in a few months, has historically led to a surge in the cryptocurrency’s price, as the reduction in new Bitcoin creation tends to create a bullish sentiment among investors. In light of this, CleanSpark aims to increase its hashrate from the current 10 EH/s to an impressive 50 EH/s, positioning itself to reap the benefits of any post-halving price increases.
The deal with Bitmain includes a strategic call option that acts as a “hedge” against the potential rise in machine prices during bull markets. “In the last bull market, machine prices increased by three to five times, and we expect the same to occur in future bull markets,” said Bradford. He further elaborated on the flexibility this agreement provides, allowing CleanSpark to manage capital efficiently and align infrastructure growth with broader economic events while ensuring stable costs for the miners.
A Sustainable Approach
CleanSpark’s operations are noteworthy for their emphasis on sustainability, primarily powered by low-carbon power sources. This focus aligns with the broader industry’s shift towards energy efficiency and reduced environmental impact.
Implications for the Market
Other major Bitcoin mining companies, such as Marathon Digital Holdings, Riot Platforms, and Cipher Mining, are also ramping up their operations in anticipation of the halving. This trend indicates a growing industry consensus that the next halving event could significantly influence the market.
However, this expansion does not come without risks. Speculative analysis from financial outlets like Seeking Alpha suggests that while the stock price of companies like CleanSpark could see short-term gains driven by retail investors, the lack of substantial profits, in the long run, could lead to a bursting of the bubble, even if Bitcoin reaches high price points such as $90,000.
A Competitive Landscape
CleanSpark’s bold investment comes at a time when the Bitcoin mining difficulty has hit record highs, and smaller miners may face challenges in maintaining profitability post-halving. Meanwhile, Bitcoin Ordinals have created new income opportunities for miners by driving transaction fees within the Bitcoin network to new heights.
In a similar strategic move, Iris Energy, an Australian Bitcoin mining company, is also gearing up for the halving by increasing its self-mining hash rate by 25% through the acquisition of approximately 7,000 S21 mining machines from Bitmain. This purchase will raise Iris Energy’s hash rate from the current 5.6 EH/s to 7.0 EH/s, with the new machines slated for installation at their mining center in Childress, Texas.
As the Bitcoin halving event draws near, mining companies are making calculated investments to ensure their operations remain competitive and profitable. CleanSpark’s $193 million investment in new miners is a testament to the company’s belief in Bitcoin’s future and its commitment to operational efficiency. While the market awaits the impact of the halving, CleanSpark’s strategic expansion sets a precedent for other players in the industry to follow suit.