In a major expansion move, leading Bitcoin mining firm Hive Digital Technologies has agreed to purchase a mining site in Paraguay from fellow miner Bitfarms for a total of $85 million. The acquisition of the facility in Yguazú will more than triple Hive’s current mining hashrate from 6 exahash per second (EH/s) to an impressive 25 EH/s by September.
The deal is structured with Hive paying $56 million for the site itself, while also agreeing to reimburse Bitfarms $19 million for power purchase commitments and an additional $10 million for remaining capital obligations. Hive estimates the cost to fully develop the location into a 200 megawatt (MW) facility at $400,000 per MW.
Hive Bets Big on Bitcoin Mining Growth
The Bitfarms acquisition marks a significant investment by Hive into the expansion of its Bitcoin mining operations. By more than quadrupling its hashrate over the next several months, Hive is positioning itself to capitalize on any recovery in the Bitcoin price and broader crypto markets. Despite the extended crypto winter, Hive appears confident that boosting its mining capacity will pay off in the long run.
We see this as a pivotal acquisition to scale our mining business and establish Hive as one of the world’s largest publicly-listed Bitcoin miners. The Paraguay site provides us with an optimal platform for long-term growth.
– Frank Holmes, Executive Chairman of Hive
The Paraguay location was likely attractive to Hive for several reasons:
- Low-cost renewable energy powered by hydroelectricity from the Itaipu Dam
- Favorable climate for mining with consistent cool temperatures year-round
- Pro-crypto regulatory environment and political stability
- Plug-and-play facility with existing infrastructure from Bitfarms
By acquiring an already operational site, Hive can accelerate its expansion timeline and avoid many of the development and construction headaches that often accompany building out large-scale mining farms.
More Mining M&A on the Horizon?
Hive’s purchase from Bitfarms could signal the start of a trend of consolidation and M&A activity in the Bitcoin mining sector. With Bitcoin and crypto prices still depressed and mining profit margins squeezed, some miners may look to offload assets to strengthen their balance sheets. Well-capitalized players like Hive can take advantage of the downturn to acquire mining capacity at attractive valuations from distressed sellers.
Other large public miners like Core Scientific, Riot Blockchain, and Marathon Digital could also be on the lookout for deals to increase their market share and improve economies of scale. Private mining companies and institutional investors may sense opportunities as well. If crypto prices remain in the doldrums, expect to see more headlines about mining M&A in the months ahead.
Bitfarms Sheds Non-Core Assets
For Bitfarms, divesting the Paraguay site allows it to bolster its cash position while focusing on its core operations in North and South America. In a press release, Bitfarms CEO Geoff Morphy explained the rationale for the sale:
This transaction further streamlines our business and allows us to focus on our most profitable mining sites in Argentina, Canada and the US. It also provides us with additional liquidity to deploy to opportunities in line with our strategic growth plans.
– Geoff Morphy, Bitfarms President and CEO
By selling an asset that it deemed non-essential, Bitfarms can reinvest the proceeds into upgrading its existing facilities or potentially acquiring infrastructure that is a better fit for its geographic footprint and overall business strategy.
Market Reaction and Outlook
News of the acquisition was received positively by the market, with Hive’s stock price rising 4.68% to $2.91 in pre-market trading following the announcement. Bitfarms shares were also up over 4% to $1.46. This came as a relief to both stocks which had sold off over 10% the previous day amid a broader crypto market rout triggered by deepening concerns over market contagion risks from the beleaguered Defi crypto ecosystem.
Longer term, the success of Hive’s Paraguay expansion will largely hinge on the trajectory of Bitcoin and the health of the overall mining economics. While the new site will dramatically boost Hive’s capacity, it remains to be seen if it can deliver the anticipated economies of scale and profitability, especially if crypto prices continue to languish. However, if the crypto markets manage to bottom out and rebound over the next 12-18 months, Hive could be in a prime position to benefit with its new, expanded mining arsenal.
Regardless of the near-term challenges, Hive’s big bet on the future of Bitcoin mining underscores the continued conviction of the industry’s top players. Despite navigating a brutal bear market, miners like Hive are still eager to put money to work, scale up, and position themselves for the next up-cycle. The Bitfarms deal may be just the first in a series of moves that reshape the mining landscape in the months to come.
