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U.S. Becomes the Largest Crypto Mining Hub After Miners Exodus from China

The price of Bitcoin climbed above the USD 60,000 mark on Friday as investors and traders anticipate that the U.S. regulators will clear the first Bitcoin futures exchange-traded fund. According to a report by CNBC, the ProShares Bitcoin Strategy ETF is scheduled to debut at the New York Stock Exchange on Tuesday, and experts believe the SEC unlikely to object to the product. “The ETF news is being priced in with the market expecting an approval on Monday. This is driving the price up,” Vijay Ayyar, Head of Asia Pacific at cryptocurrency exchange Luno, told CNBC. As a result of the crypto boom that occurred earlier this year, many companies and organizations have become noticeably more open to blockchain technology and cryptocurrencies. ISW Holdings Inc. (OTC: ISWH), Riot Blockchain, Inc. (NASDAQ: RIOT), Sphere 3D Corp. (NASDAQ: ANY), SOS Limited (NYSE: SOS), HIVE Blockchain Technologies Ltd. (NASDAQ: HVBT

Meanwhile, the U.S. has become one of the main hubs of the Bitcoin mining market. This is in large part due to the Chinese government’s crackdown on cryptocurrencies. Local agencies, including the country’s securities regulator and the People’s Bank of China (PBOC), recently said in a statement that all cryptocurrency-related business activities are illegal and promised to punish illicit activities involving digital currencies. As a result, the U.S. now has the largest share of global Bitcoin mining networks, according to data from the University of Cambridge.

ISW Holdings Inc. (OTC: ISWH), transitioning to “BlockQuarry,” pending name change, announced last month for current and prospective shareholders with a more detailed discussion about, “the Company’s recent landmark deal with Bitmain Technologies (“Bitmain”), the world’s leading producer of cryptocurrency mining hardware and a leading global cryptocurrency mining firm.

Total Mining Capacity and Timeline to Launch. The deal will involve 56,000 Bitmain mining rigs pairing with 200 megawatts (“MW”) of power at the Company’s “POD- CITY” location in Georgia. The Company expects to have the first 20 MW of power paired with rigs and running full-out by October 2021. The schedule calls for having all 56k miners hooked up to all 200 MW of power and running full-out by October 2022.

Estimated Topline Revenue Impact. The Company estimates that this full complement running at full capacity will be capable of driving estimated annual revenues well in excess of $100 million (over $10 million per month) for ISW Holdings/ BlockQuarry in hosting service fees. This is not contingent upon cryptocurrency pricing.

Key Partners. The partnership is tripartite, between Bitmain, ISW Holdings, and Bit5ive, LLC (“Bit5ive).

Bitmain will bring mining machines, capital, and expertise into the bargain, consuming hosting services and power up to and potentially in excess of 200 MW for a five-year term.

Bit5ive will bring power, hosting services, project management services, and expertise to the table.

ISW Holdings will provide funding, expertise, hosting services, mining services, access to power, and access to public market investors.

Costs Involved. For ISW Holdings, the cost for the entire roll-out to setup and activate mining machines using 200 MW of power will be a total of $62 million. $6 million of this has already been paid. $56 million remains.

Current Mining Operations (excluding Bitmain deal). The Company is currently running 700 miners, representing a mix of Bitmain Antminer S17’s, BitMain S19 95TH/ s’s, and Canaan Avalons. Those miners are running in POD5 units in Stronghold,Pennsylvania at a site managed by Bit5ive. The current hashrate is 36,000 TH/s, with an upside potential of 54,000 TH/s given current capacity. This operational state is capable of producing annual revenues of $4.8 million to $6 million given current three-month trailing average pricing for major cryptocurrency markets. The Company is also actively expanding its mining operations as the business scales up.

Management Commentary. ‘The nature of our business changed significantly last summer when we partnered with Bit5ive and began designing state-of-the-art mining pods with a bold vision and a deep conviction in the value proposition of the cryptocurrency marketplace,’ remarked Alonzo Pierce, President and Chairman of ISW Holdings. ‘Now, just a bit over a year later, we are on the verge of becoming one of the top players in the cryptocurrency world after bringing Bitmain to the table in a deal that will see all parties unlock significant value. Looking ahead, our hosting service revenues will be stable and substantial, and capable of strong growth. And our mining revenues will fluctuate with prices in the cryptocurrency space. That will give us a strong foundation and enormous growth with a significant non-volatile component. This should put us in position to meet requirements to migrate shares to a major national listed exchange in due course. We have a number of additional catalysts in the works as well, and I look forward to providing more insights in the very near future.'”

Riot Blockchain, Inc. (NASDAQ: RIOT) announced last month its September production and operations updates, including its unaudited Bitcoin production for September 2021 and its miner shipping/deployment status. In September 2021, Riot produced 406 BTC, an increase of approximately 346% over its September 2020 production of 91 BTC. Year to date through September 2021, the Company produced a total of 2,457 BTC, an increase of approximately 236% over its BTC production during the same 2020 period of 731 BTC.

Sphere 3D Corp. (NASDAQ: ANY) announced this June that it has entered into an Agreement and Plan of Merger with Gryphon Digital Mining Inc. (“Gryphon”), a privately-held company focused on the mining of bitcoin using renewable energy. Upon completion of the merger, the Company will change its name to Gryphon Digital Mining Inc. The merged company will focus on expanding Gryphon’s digital mining operations and utilize Sphere 3D’s proprietary enterprise solutions to optimize Gryphon’s processes. “Gryphon’s future focus on mining using 100% renewable energy will set the bar for mining companies of the future. We have been engineering GPU-based converged systems for many years and are excited to leverage our experience to enhance the performance of Gryphon’s operations. We believe the merger of the two companies provides an excellent opportunity to create meaningful value for our shareholders,” said Peter Tassiopoulos, Sphere 3D’s Chief Executive Officer.

SOS Limited (NYSE: SOS) reported back in June that it has entered into a joint venture agreement with Niagara Development LLC (“Niagara Development”), a New Jersey limited liability company, for a joint venture to be based in Niagara, Wisconsin. The joint venture, FD LLC, is expected to carry out crypto-currency mining operations and construct an international standardized Digital Super Computing Custody Operation Center. Under terms of the agreement, Niagara Development will be responsible for providing up to 150MW of electricity, including electricity generated from renewable sources, and construction the Digital Super Computing Custody Operation Center. SOS will be responsible for the management, operations and financing of the joint venture. SOS remains committed to its block-chain strategy and strive to become a sustainability leader in the industry.

HIVE Blockchain Technologies Ltd. (NASDAQ: HVBT) reported last month that it has ordered 1,800 Antminer S19j Pro miners from Bitmain Technologies Ltd. (“Bitmain”). These new miners have an aggregate hash power of 180 Petahash per second (PH/s). HIVE is proud to reconnect with Bitmain one of the leading manufacturers in our industry and is excited to make this initial order of S19j Pro miners from Bitmain. These 1,800 miners are the first of our 2022 mining purchase program and will be delivered in 6 equal tranches of 300 miners, commencing in January 2022 through June 2022. “We are constantly upgrading our ASIC fleet to have the most efficient miners we can buy from cash flow,” Frank Holmes, Executive Chairman of HIVE continued, “This purchase with Bitmain enables us to maintain our strategy to diversify the manufacturers we purchase from. Over the past year, we have been expressing our concerns about global shortages in chips and logistics delays in shipping equipment from Asia due to Covid 19. We have deep relationships Bitmain, MicroBT, and Canaan which are all top global manufacturers in our industry.”

S. Jack Heffernan Ph.Dhttps://www.knightsbridgelaw.com
S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.

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