‘Seized The Opportunity’: Canada’s Bitfarms Bought $43 Million In Bitcoin During $300 Billion Crypto Crash

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Topline

Canadian bitcoin mining company Bitfarms announced Monday it invested $43.2 million in bitcoin as the cryptocurrency plummeted about 12% during the first week of the year, becoming the latest publicly traded company doubling down on the nascent crypto market despite some experts warning its volatility makes it an unreliable investment.

Bitcoin prices have fallen about 12% this year but have skyrocketed nearly 4,300% over the past five … [+] years.

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Key Facts

In a Monday statement, Toronto-based Bitfarms said it purchased 1,000 bitcoins during the first week of January, boosting its holdings to more than 4,300 coins worth about $175 million; to compare, Bitfarms posted about $121 million in revenue during the 12 months ending in September.

“With the dip in bitcoin, we seized the opportunity to move cash into BTC,” Bitfarms Founder and CEO Emiliano Grodzki said in the release, while adding the company’s “guiding strategy” is to accumulate the most bitcoin for the lowest cost and in the fastest amount of time.

Nasdaq-listed shares of Bitfarms fell about 4% in pre-market trading after the announcement, roughly tracking the broader cryptocurrency market’s losses of about 3% over the past 24 hours.

Bitfarms’ investment comes less than a week after MicroStrategy, the data analytics firm helmed by billionaire bitcoin bull Michael Saylor, disclosed it purchased nearly 2,000 bitcoins for $94 million at the start of December, as prices similarly struggled to recoup losses following a staggering record run in November.

Bitfarms says it’s purchased nearly 70% of its total bitcoin holdings since the third quarter of last year, a massive investment that helped shares soar as much as 125%—before bitcoin’s plunge in November helped push the stock down more than 50%.

Big Number

$10 billion. That’s nearly how much about 20 public companies with a market capitalization of more than $1 trillion have invested in bitcoin, according to London-based crypto firm Nickel Digital Asset Management. MicroStrategy, which owns more bitcoin than any other corporation in the world, holds about 124,400 coins worth nearly $5.1 billion, while Tesla’s roughly 43,200 coins are worth about $1.8 billion.

Contra

“Volatility in bitcoin shows that companies cannot rely on cryptocurrencies as sound corporate cash investments,” Jerry Klein, the managing partner of $9 billion advisory Treasury Partners, wrote in an email to Forbes last month. “Corporate investors get none of the sweets, but all of the indigestion by investing in bitcoin.” Accounting rules require corporations to treat bitcoin as an intangible asset, Klein says, meaning firms “must write down the value if the price declines, but they can’t write up the value if the price appreciates.”

Key Background

Trading at about $40,800 on Monday morning, bitcoin has plunged roughly 40% from a record high of $69,000 in November, as the broader market reels from the prospect of central banks pulling pandemic-era economic stimulus more quickly than previously expected. “The long-term outlook is still bullish for both the top two cryptocurrencies, but the short-term is looking ugly,” Oanda senior market analyst Ed Moya wrote in a weekend note. Despite bitcoin’s bouts of intense volatility, Goldman Sachs analysts wrote in a note to clients last week that the cryptocurrency could top $100,000 in the next five years, as it increasingly competes with gold as an inflationary hedge. For now, the latest drawback has pulled the value of the world’s cryptocurrencies, currently about $1.9 trillion, down more than $300 billion over the past week.