The Bitcoin mining company TeraWulf recently said it would consider a merger if it would increase profitability for the company and its shareholders rather than boost its expansion rate. In a recent interview, TeraWulf’s Chief Strategy Officer Kerri Langlais mentioned that empire-building during mergers without increasing organic profitability made no sense.
Kerri explained that while the company didn’t ignore the need for organic growth, a speedy expansion was not its selling point. Instead, TeraWulf’s success hinged on allocating capital to provide stakeholders with sustained returns. Kerri also said that making this distinction is crucial to investors as they can set aside companies that are ‘simply growing’ from those ‘growing profitably.’
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Since early 2023, various analysts have discussed the possibility of increased Mergers and Acquisitions (M&A). In January 2023, a Hashrate Index blog mentioned an expected rise in public BTC miners going private or embracing mergers. Some reasons mentioned in the prediction included plunging BTC mining stocks, reduced returns, annual reporting costs, and increased administrative costs.
Several companies decided on mergers after the Bitcoin halving event earlier this year. On June 27, CleanSpark merged with GRIID after completing a $155 million transaction. Riot Platforms also tried to buy out Bitfarms on May 28 with a $950 million offer. However, Bitfarms expressed a lack of aligned interest with Riot. Riot still managed to acquire 14.9% of Bitfarms’ shares.
TeraWulf expects to stay profitable
Langlais explained that revenue and hashrate are the current metrics used to value BTC mining businesses. However, she wishes the mining community could turn to metrics, such as profitability and EBITDA, to value mining businesses. Langlais said that these metrics can help the company make more sound decisions about possible M&A by determining which offers are better.
TeraWulf expects to continue being profitable despite current BTC market conditions. The company diverted part of its ventures into high-performance computation and AI. These ventures diversify TeraWulf’s revenue sources mainly because of the challenges caused by Bitcoin halving.
Due to increased resource competition, Kerri confirmed that more hurdles are expected in the Bitcoin mining community. She mentioned that companies expanding on a grander scale will compete for available energy sources and mining sites. The demand will increase resource prices, possibly worsening BTC mining profitability.
“This intense competition is driving up land and power prices, thereby diminishing the profitability of new BTC mining projects.”
TeraWulf depends heavily on nuclear energy to power its rigs, significantly reducing power costs. The move to nuclear power came after the crypto winter in 2022, fueling lower BTC prices and rising energy costs.
Miners may be near capitulation
BTC mining rewards have been reduced to 3.125 BTC since the halving event. The hashrate price is also down to a near-all-time low. According to a July 3 CryptoQuant research, the Bitcoin network hashrate is down by 7.7%, the lowest since the 2022 crypto winter.
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Available revenue for BTC miners is also down, considering lower transaction fees on the network and reduced BTC prices. Some miners have sold their assets since BTC mining profitability declined.
“Total daily revenues have decreased from $79M on March 6 to $29M currently. Moreover, the revenue from transaction fees has fallen to only 3.2% of the total daily revenues, the lowest share since April 8.”
CryptoQuant believes the mining community is ‘near capitulation,’ meaning small miners may stop mining and sell off their BTC. It will also be hard for other mining companies to upgrade to newer equipment.
Cryptopolitan reporting by Collins J. Okoth
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