XPDI – The bitcoin miner that sells shovels during a gold rush, the AWS for crypto with $200M profit in 2021 and $44.9M revenue last month
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I know that the SPAC landscape isn’t doing very well right now, I am trading SPACs since FMCI and I see a lot of good and bad companies going public. I believe Core Scientific/XPDI is the most attractive investment you can make at the current price, and I will explain to you why I think so.
In their investor presentation they mention their Q3 2021 results with 1,588 Bitcoins mined which at the current price of $43k per Bitcoin is a whopping $68.2M. That’s right, this is a SPAC with actual revenue. But that isn’t the only revenue-stream, Core Scientific also rents out hardware to 3rd party mining operations, it is like an Amazon AWS for crypto-currency mining. Their estimated revenue for the whole year of 2021 was $493M, that’s half a billion USD.
Their projected revenue for 2022 is 1.14B USD. I know people are skeptical when it comes to revenue projections of SPACs, and that is the only sane thing to do. But given this projection is just a single year ahead, and that they already generated a substantial amount of revenue in the last year, I would like to make an exception here and believe them for a second. The best thing is, all of their projections are based on Bitcoin being at $30k, or 40% lower than it is now at $43k, which means in reality revenue and profit would be much higher if Bitcoin stays at the current price. If it goes back to $60k they would be 100% higher.
Their adjusted EBITDA for 2021 is $203M, and for 2022 they expect to make $572M. Just read the last sentence again, this company made over $200M profit last year, and is going to make $572M in this year. This is not some 2028 evtol revenue projection of a company that has a 3D rendering of an ugly looking helicopter, this is cold hard cash in a bank account.
Running a bitcoin mining operation and calculating your expected revenue for the future is basically dependent on a few variables. 1. Electricity cost, 2. Hardware, 3. Mining difficulty and of course the 4. Bitcoin price. The first 3. variables are pretty easy to project and I don’t think that there is much uncertainty in them. The mining difficulty for Bitcoin should have even developed positively, as many mining operations in China had to shut down.
So the revenue and profit projections of Core Scientific for 2022 really only depend on a single unknown variable, which is the price of Bitcoin. Which means to understand if XPDI is a good investment or not, we only need to understand where the Bitcoin price might be headed.
As most of you might be aware of, we are right in the middle of maybe the biggest asset inflation period in human history. The FED recently addressed this inflation by acknowledging that it is not transitory, and that only a change in fiscal and monetary policy can really get it down again. That is a huge shift from previous statements, and should be a good sign that we might be onto something here.
Many people speculate on how the markets will look like this year, but personally I am convinced that inflation is yet to peak. The economy as a whole is like a big container-ship, and it takes some time to change course or even slow down. So at least for all of 2022 there is a good argument to make that all asset classes, including crypto-currency will see more gains. Fundamentally nothing has changed and Covid is still running hot with new variants, there are a lot of important events this year for crypto such as Ethereum 2.0 launch of staking as well as layer 2 solutions to be deployed. Bitcoin will profit from these positive headwinds and continue to be an asset which gains popularity among institutional investors.
Core Scientific’s latest press release, which can be found here [https://www.businesswire.com/news/home/20220105005454/en/Core-Scientific-Announces-December-Updates](https://www.businesswire.com/news/home/20220105005454/en/Core-Scientific-Announces-December-Updates)
mentions “**Core Scientific minted 1,044 bitcoins in December..**” which means they made 1044* $43k = $44.9M revenue in a single month just from mining not including rents from hosting customers.
Disclosure + Disclaimer of my position:
Long 15,000 shares of XPDI
Cryptocurrency
