When preparing for TWTW (a weekly podcast hosted on X by D.R. Lewis and Matt Case) last week, I noticed Bitfarms was the biggest loser in terms of YTD stock performance among the top 15 public miners by market cap. Once a hot stock in the Bitcoin mining sector, Bitfarms drew attention from rival Riot Platforms, which attempted a lucrative acquisition. Bitfarms made media headlines with its defensive moves, including executive reshuffling and acquiring Stronghold Digital Mining. However, after the dust settled, Bitfarms’ stock price has remained disappointing. This raises the question: is a rebound overdue, or is Bitfarms gradually losing its market position?
Basic Profile
Founded in 2017, Bitfarms (BITF) is a Canadian Bitcoin mining company listed on both the Toronto Stock Exchange and Nasdaq. With operations across Canada, the United States, Paraguay, and Argentina, Bitfarms has 12 operating data centers and two additional facilities under development. As of November 30, 2024, the company’s hashrate stood at 12.8 EH/s.
Two notable details about Bitfarms stand out. First, the company highlights its ESG (Environmental, Social, and Governance) initiatives prominently on its website. While these efforts are a good attempt at raising awareness, they lack depth compared to more comprehensive ESG strategies in practice. Second, Bitfarms claims to be “the only publicly traded crypto mining company audited by a Big Four accounting firm”, showcasing its commitment to corporate-level transparency and financial integrity—an important trust factor for investors. However, the claim of being uniquely audited has yet to be independently verified.
Financial Performance
Bitfarms delivered mixed financial results for Q3 2024. The company reported $44.9M in revenue, reflecting a 30% YoY increase driven by operational expansions and strategic investments. However, the gross margin dropped to 38%, a -6% dip from Q3 2023, due to rising electricity costs and network difficulty. Adjusted EBITDA fell 28% YoY to $6.4M.
On the bottom line, the net loss widened to $36.6M from $16.5M in Q3 2023. This was primarily driven by elevated operating expenses, non-cash impairments, and depreciation costs tied to fleet upgrades and U.S. expansion initiatives. Operating expenses surged 230% year-over-year, underscoring the capital-intensive nature of Bitfarms’ operations. Despite these challenges, the company maintained a total asset base of $586.6M, supported by $72.6M in Bitcoin holdings, which provides a liquidity cushion ($146M total liquidity) amid rising costs.
Operational Advancements and ASIC Upgrades
Bitfarms continues to focus on improving operational efficiency through ASIC fleet upgrades. In Q3 2024, it deployed 5,400 miners across Canada, the U.S., and Paraguay. Additionally, Bitfarms plans to upgrade 18,853 Bitmain T21 miners with the latest S21 Pro models. These upgrades, scheduled for delivery in December 2024 and January 2025, promise a 20% improvement in energy efficiency (15 w/TH) and higher hashrates (234 TH/s).
According to the company, these upgrades are expected to enable Bitfarms to achieve an 18 EH/s operating capacity by March 31, 2025 and 21 EH/s by June 30, 2025. This marks a six-month postponement from the company's earlier guidance* in its September presentation, which projected reaching 21 EH/s by the end of 2024.
*As of the time of writing (Dec 13, 2024), Bitfarms' website still displays a projected operating capacity of 21 EH/s by year-end 2024. In short, there seems to be inconsistency regarding the delivery timeframe for achieving the 21 EH/s capacity.
Data Center Expansion: Acquisition of Stronghold
As part of its expansion strategy, Bitfarms announced the acquisition of Stronghold Digital Mining in a transaction valued at $125M in equity plus $50M in debt. The deal includes two Tier 2 alternative energy merchant power plants in Pennsylvania (Scrubgrass and Panther Creek), with combined power capacity of 165 MW and expansion potential to support 10 EH/s hashrate in 2025.
Through this acquisition, Bitfarms aims to diversify its operations and strengthen its U.S. presence by integrating power generation and energy trading capabilities. Additionally, the deal includes 142 MW of PJM interconnection capacity, with incremental potential to 790 MW. While the acquisition could solidify Bitfarms’ position as a dominant player in Bitcoin mining, it also introduces integration challenges and financial strain from the significant capital outlay. Moreover, the 71% premium paid for Stronghold raises concerns about whether the anticipated synergies justify the price tag.
Note: While acquisition hasn't yet closed, Bitfarms entered two hosting agreements (Oct 31 and Sep 13) and with Stronghold Digital Mining’s subsidiary. These agreements enabled Bitfarms to deploy 20,000 miners across Stronghold’s 2 sites, supporting a combined hashrate of approximately 4 EH/s. Once the acquisition is finalized, these hosting agreements will transition to self-mining operations.
Dust Settles with Riot Platforms
After months of uncertainty, Bitfarms reached a settlement with Riot Platforms in September 2024. Riot, as the largest shareholder with over 15% ownership, will no longer pursue a takeover but retains significant influence over Bitfarms’ strategic direction. The agreement includes board restructuring under Riot’s influence, which could enhance governance but may also raise concerns about independence.
While this resolution provides stability, it underscores the complexity of balancing stakeholder interests in a highly competitive market. Riot’s vested interest ensures alignment, but whether this influence constrains Bitfarms’ autonomy remains to be seen.
Diversification into HPC and AI
Bitfarms is actively exploring high-performance computing (HPC) and AI to diversify its revenue streams. The company has selected two U.S. sites for a 1-2 MW pilot project, securing land and power. Discussions with potential partners and suppliers are ongoing, with deployment targeted for 2025. This initiative aligns with industry trends as Bitcoin miners increasingly leverage their infrastructure for AI and HPC applications. Bitfarms’ strategic moves in this space could open up new growth opportunities, but the early-stage nature and the absence of clear financial projections make it difficult to evaluate its long-term viability.
Final Thoughts
Amid acquisition chaos and market volatility, Bitfarms remains focused on expansion, operational efficiency, and laying the groundwork for diversification. While the company’s financial and operational strategies are aligned with industry trends, I think it struggles to stand out due to a lack of a clear, unique competitive advantage. This makes it difficult for the market to pinpoint a compelling investment thesis.
Looking ahead, Bitfarms’ strategic shift towards the U.S., where it aims to increase operational power from 6% to 66% in 2025, reflects a bold bet on regulatory stability and energy development. Whether this move will pay off depends on execution and the evolving competitive landscape. The significant premium paid for Stronghold and ambitious efficiency targets raise additional questions about strategic prioritization and financial discipline. It will be interesting to closely monitor how these geolocation shifts and merges unfold in the following quarters.
Disclaimer: The views expressed in this article are my own and are based on publicly available information. This content is intended for informational purposes only and should not be construed as investment advice. Readers are encouraged to conduct their own research before making any investment decisions. Past performance is not indicative of future results. No recommendation or advice is being provided as to the suitability of any investment for any particular investor.
