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Hut 8: The Struggles of One of Canada’s Largest Miners


www.coindesk.com 28 April 2020 23:30, UTC
Reading time: ~2 m

For an industry whose foundation was built on transparency, there is a still lot about the cryptocurrency space that remains opaque. Companies are hesitant to disclose revealing information unless required to do so. Thankfully, the filings of publicly listed companies provide an excellent, yet underutilized, resource for understanding crucial details that would otherwise be unknown to the community.

CoinDesk Research presents an in-depth look into one of the largest publicly listed mining companies, Hut 8. The halving will serve as a pivotal moment for the industry as a reduction in the block reward subsidy puts several miners’ operations in jeopardy. In this report, we get a more intimate look into the space as we delve into Hut 8’s financials and identify key risks & concerns.

Some takeaways:

  • As the network hashrate continues to grow, Hut 8’s revenue and margins have decreased considerably over the past couple quarters. With the halving reducing the block subsidies to miners, Hut 8’s existing mining rigs are likely to become unprofitable unless bitcoin prices receive a notable boost.
  • Management is interested in upgrading to more efficient ASIC miners. This will likely require additional funding which will be difficult under the current macro environment coupled with the departure of its CEO who was pivotal in the company’s previous funding rounds.
  • Given Hut 8’s large amounts of fixed interest rate debt collateralized by its bitcoin inventory, the company is essentially making a levered bet on bitcoin prices going higher. Any price fluctuations will have a serious impact on both revenue and the value of its assets.
  • A peculiar accounting change that involved previously recognized impairments on equipment drastically altered the financial results. Adding more reason for concern, one of the Board’s Audit committee members resigned from her position the same day that the 2019 audited financial statements were released.

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