Volatility goes hand-in-hand with Bitcoin, particularly recently after the April halving. That rollercoaster ride isn't for the faint-hearted or for many crypto companies. But it does seem to be for BitFuFu FUFU, the digital asset mining company based in Singapore.

The company reports that it has created a sustainable business model, which performs well in both bullish and bearish market conditions due to its unique approach. This was recently on display, with BitFuFu reporting 69.7% year-over-year revenue growth in its second-quarter results and forecasting continued growth in the third quarter and beyond.

"Our business model's inherent flexibility – whether by increasing or reducing purchases of computing power, matching short-term and long-term procurements, or optimizing the mix between cloud-mining and self-mining computing power – enables us to sustain growth and profitability in a complex and volatile market environment," said Leo Lu, BitFuFu's Chairman and Chief Executive Officer, during the company's earnings conference call. "Considering that total revenue of $274 million in the first half of 2024 nearly matches our full-year revenue for 2023, and with combined Q1 and Q2 adjusted EBITDA reaching $58 million, we expect substantial growth in both revenue and adjusted EBITDA in 2024, compared to 2023."

Check out BitFuFu's recent earnings report here!

Outshining Some Rivals

For the second quarter, BitFuFu posted revenue of $129.4 million, up almost 70% year-over-year. Growth was driven by strength in both its cloud-mining and self-mining operations. Cloud-mining revenue was up 67% compared to last year's second quarter, with registered users increasing 87% to more than 395,000. Meanwhile, revenue in the company's self-mining operations increased 81% to $51.1 million.

Recurring revenue from customers active during the same period last year accounted for $47.4 million, or approximately 62% of cloud-mining revenue. New customers contributed $29.3 million, or 38%, highlighting the effectiveness of BitFuFu's marketing and customer acquisition efforts. Sales and marketing expenses as a percentage of cloud-mining revenue remained stable at 0.8%, demonstrating BitFuFu's ability to scale and acquire users efficiently.

Double-digit revenue growth isn't new in the mining industry, but BitFuFu says its approach is what makes it stand out from its rivals which include Bitfarms Ltd. BITF and Riot Platforms Inc. RIOT. BitFuFu's competitive advantage lies in its strategy of dynamically allocating hash rate between cloud-mining and self-mining, unlike its peers focused primarily on self-mining. This approach allows BitFuFu to generate upfront capital, scale operations and hedge against Bitcoin price volatility by pre-selling hash rate at fixed prices. By securing future revenue regardless of market conditions, BitFuFu ensures resilience and profitability, distinguishing itself in both rising and declining markets.

Cushioning The Potential Blow

This growth is encouraging, given the April Bitcoin halving, which cut miners' rewards by half, and a recent decline in Bitcoin prices that has many investors concerned. BitFuFu's Lu acknowledged these challenges and highlighted the steps the company is taking to cut costs and improve profit margins if Bitcoin prices stay depressed.

Since April, BitFuFu has applied technology to overclock the hashrate of its ASIC mining machines, increasing computing power by 10% to 30% over the mining capacity of standard machines. BitFuFu's in-house mining facility management system has enhanced the efficiency of its mining machines, including those leased or operated by its partners. Additionally, BitFuFu has adjusted the operating mode of its mining machines in facilities with higher electricity and hosting fees and implemented a floating price mechanism in its hosting contracts. This approach allows the company to align costs with Bitcoin price fluctuations, reducing expenses and ensuring profitability even during downturns.

BitFuFu is also actively acquiring mining facilities globally that offer lower electricity costs. BitFuFu is confident it will have news on that front soon, said Lu. The company is not just surviving in the current environment; it's also making strategic moves to position itself for future growth when Bitcoin prices rise again. BitFuFu remains confident in the long-term potential of Bitcoin, noting that year-to-date, Bitcoin's price is up about 40%, outperforming the S&P 500.

"Given our long-term bullish outlook on Bitcoin, we are taking advantage of the current downturn in Bitcoin pricing to secure lower cost, long-term computing power," said Lu. "Specifically, we intend to sign a two-year purchase agreement for computing capacity, enabling us to lock in a portion of our mining costs over the next two years."

Looking Beyond

As BitFuFu scales, it is also building new revenue streams and growth opportunities. The mining facility management system, for example, has the potential to be monetized by offering it as a service to other miners. Additionally, BitFuFu is moving forward with its strategy to acquire or build its own mining farms. This vertical integration will allow BitFuFu to transition toward a more diversified and resilient portfolio of Bitcoin mining sites, including both self-owned/operated and third-party hosted sites. This strategy also enables further optimization of costs, particularly in terms of power consumption.

Featured photo courtesy of BitFuFu.

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