Since Bitcoin and the digital asset market in general reached record highs in 2021, the world of mining fully attracted traditional companies that were tempted to maximize their profits. This is nothing less than an unusually profitable business model.
Even as mining margins have shrunk to 60 and 70% since cryptocurrency prices corrected, traditional companies continue to participate in the sector as net margins in other industries continue to be shaken by various macroeconomic factors, including the pandemic. Of course, margins are based on the direction of cryptocurrency prices.
To take advantage of the current profitable opportunities, some long-established companies have completely transformed themselves into digital currency miners, while others diversified their legacy business to earn an additional revenue stream by mining and providing mining-related services.
Are these new entrants surviving and thriving in this sector? Let’s see how these new entrants have fared so far with their new ventures.
What happens to companies that turn to a total transformation?
One of the best examples of complete transition is Nate’s Food, which changed its name to NHMD Holdings as it moved from its original product (premixed pancake and waffle batter in pressurized cans) to bitcoin mining last year.
The company reported no sales for the fiscal quarter ended August 31, 2021. For the quarter ended November 30, 2021, the company reported $21,204 in mining revenue, perhaps a glimmer of hope. However, the company was still in the red, as its net loss for the period was $74,565.
The small company’s shares, which trade on the over-the-counter markets, more than tripled in price last year as Bitcoin soared to record highs around October and November. The stock has now pared nearly all of its gains since then, along with those of other cryptocurrencies, and NHMD now trades slightly above the levels of its pre-mining days, according to TradingView data. The company did not immediately respond to requests for comment.
Another example of a company undergoing a complete transformation is Chinese sports lottery company 500.com, which announced early last year that it would start buying bitcoin miners and subsequently rebranded itself as BIT Mining (BTCM). The company now has a bitcoin mining capacity of 4,800 gigahash per second (GH/s) and 825.4 petahash per second (PH/s), according to its recent earnings report . However, the stock has fallen about 88% in the past 12 months, according to data from TradingView .
And while the examples are many, it would be a missed opportunity not to include Fort Lauderdale, Florida-based anti-inflammatory and anti-aging formulations manufacturer Graystone Company (GYST) in this role. The company announced last year that it would engage in bitcoin mining to improve its own financial health and use mining as a “hedge” against its legacy business. The company now plans to generate 1 EH/s of mineable power by 2024 and currently has 2.1 PH/s of mineable power, according to its website. Graystone shares have also fallen 27% in the past year.
And in the case of companies that kept their business?
Therefore, a total transformation did not really help the above companies, at least in terms of their share price performance. But what about companies that kept their core businesses, but added mining as an additional source of revenue?
The strategy likely helped a Thai information technology company boost its share price by more than 500% after it announced plans to diversify into bitcoin mining.
Jasmine Technology Solution, which changed its name from Jasmine Telecom System Public Company, announced its foray into cryptocurrency on August 10, 2021. At the time, the company cited the economic uncertainty caused by a new wave of COVID-19 cases as the reason for seeking new business ventures that could provide a new source of revenue for the company.
It seemed to have worked in Jasmine’s favor, as shares have now nearly quintupled since the announcement, according to TradingView data. However, the company did not generate a large amount of revenue from mining, as its recent filing shows that telecom service accounted for most of its revenue in the fourth quarter of 2021.
“We did not transform, but expanded our potential for competition, investment and other aspects such as space, electricity and partners related to bitcoin mining operation,” a company spokesperson told CoinDesk.”
The company saw an opportunity to grow its business in an ever-expanding digital asset market and, given that it was already involved in the IT sector, delving into cryptocurrency was a natural fit, the spokesperson said. Jasmine already “had steady growth with high revenues and recurring margins” before entering mining, the representative said.
“We perceive that bitcoin mining has a shorter payback period compared to investment in technology and telecom infrastructure, and it is a huge market that gives us the opportunity to grow further.”
Jasmine Technology expects its revenue from bitcoin mining to gradually increase as it obtains more mining computers. The company plans to have 500 machines by the first quarter and another 3,000 within this year, while negotiations are underway to obtain more mining rigs. “We perceive that bitcoin mining has a shorter payback period compared to investment in technology and telecom infrastructure, and it is a huge market that gives us the opportunity to grow further,” said Jasmine’s spokesperson.
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