As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
COINBASE CEO DIALS BACK ON RELOCATION REMARKS: Coinbase (COIN) CEO Brian Armstrong said the Securities and Exchange Commission is on "a lone crusade," criticizing the regulator and Chief Gary Gensler, but dialed back on his suggestion the company may leave the U.S., CNBC’s Ryan Browne reported Monday. Armstrong said Gensler is taking a "more anti-crypto view," adding that "I don’t think he’s necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the U.S. writ large, but it also is an opportunity for Coinbase to go get that clarity from the courts that we feel will really benefit the crypto industry and also the U.S. more broadly." Armstrong clarified that Coinbase is not going to relocate overseas, but he is "very interested" in the UAE as a country to make more investments in.
Meanwhile on Wednesday, BofA analyst Jason Kupferberg raised the firm’s price target on Coinbase to $47 from $45 and kept an Underperform rating on the shares after updating Q2 and FY23 estimates following the company’s Q1 report. The firm lowered its transaction volume estimates for Q2 and FY23 due to lower Q1 volumes and soft trends in April, but increased transaction revenue estimates for the quarter and fiscal year due to higher expected take rates.
Additionally on Monday, Daiwa analyst Steven Nie upgraded Coinbase to Buy from Hold with a price target of $65, up from $58, after taking over coverage of the name. The company’s Q1 adjusted EBITDA margin of 39% came in as a strong beat and it is accelerating global expansion and crypto-native innovations, the analyst said. The firm believes the current share price has largely priced in the U.S. regulation uncertainty but underestimates Coinbase’s recovering profitability, accelerating global expansion and crypto-native innovations.
CRYPTO FIRMS REPORT Q1 EARNINGS: On Thursday, Stronghold Digital Mining (SDIG) reported a first quarter loss per share of (65c) on revenue of $17.27M, which compared to analyst estimates of loss per share of (14c) on revenue of $18.89M. During Q1, Stronghold earned approximately 618 bitcoin through its mining operations. The company expects to achieve hash rate capacity of approximately 4 EH/s by the end of Q3. “We have only a few thousand slots left at our fully developed, energized data centers to reach our target hash rate capacity of 4 EH/s, and we are focused on the rapid deployment of our recent order of 5,000 MicroBT M50 miners and the 4,000 miners associated with the recently announced Canaan Bitcoin Mining Agreement, 2,000 of which are already on site,” said CEO Greg Beard. “Since consensually returning approximately 26,000 miners to our previous lender starting in August 2022, we have grown hash rate capacity by approximately 2.2 EH/s, with incremental spend of approximately $15M, and eliminated approximately $67M of debt. We see an opportunity-rich environment, both in the secondary, distressed miner market, as well as in the hosting market, where we are gaining traction with our differentiated agreement structure. These opportunities exceed the capacity of our existing infrastructure, and we continue to evaluate ways to deploy the approximately 25 megawatts of end-to-end data center equipment that we own and hold in inventory.”
Bakkt (BKKT) also reported Q1 earnings on Thursday with a loss per share of (17c) on revenue of $13M, which compared to analyst consensus of a loss per share of (18c) on revenue of $14.35M. “We are proud of our accomplishments in the first quarter and thrilled about the recent close of our acquisition of Apex Crypto,” said CEO Gavin Michael. “Our secure qualified custodian combined with Apex Crypto’s advanced trading capabilities positions us to be the crypto infrastructure provider of choice. We are excited to bring our unique, highly regulated, best-in-class crypto platform to our new fintech, existing and prospective clients to explore opportunities to deepen relationships. We will continue our disciplined approach to managing expenses, which enabled us to deliver improved operating margins in the first quarter of 2023. We believe we are well-positioned to benefit from improving crypto market conditions.”
On Wednesday, Marathon Digital (MARA) reported a Q1 loss per share of (5c) on revenue of $51.1M, which compared to analyst estimates of a loss per share of (8c) on revenue of $49.3M. “After weathering a tumultuous 2022 that tested the resilience of our entire industry, this year is off to a strong start as we grew our hash rate, reduced our cost to mine, and improved our balance sheet during the first quarter,” said CEO Fred Thiel. “In Q1, we grew our energized hash rate 64% from 7.0 exahashes to 11.5 exahashes. By growing our hash rate faster than the rest of the network and improving our uptime, we also increased our bitcoin production. We produced a record 2,195 bitcoin during the first three months of this year, which is a 74% increase from the prior year. In addition to our energized progress, we also improved our financial position during the quarter. We increased our cash position by $12M, reduced our debt by $50M, and increased our unrestricted bitcoin holdings by 3,132 bitcoin after we prepaid our term loan and terminated our credit facilities with Silvergate Bank. We exited the quarter with approximately $124.9M in unrestricted cash and cash equivalents and 11,466 bitcoin, the market value of which was approximately $326.5M on March 31. With more hash rate coming online in the months ahead, Marathon remains on track to reach our 23 exahash goal near the middle of this year. We remain optimistic that we can achieve our primary growth targets and establish Marathon as one of the largest, most energy efficient, and most technologically advanced Bitcoin mining operations globally.”
Additionally on Wednesday, CleanSpark (CLSK) reported a Q1 loss per share of (23c) on revenue of $42.5M, which compared to analyst consensus of loss per share of (33c) on revenue of $41.82M. The company reported $5.3M in bitcoin assets as of March 31. "This has been a quarter of execution as we’ve made major progress toward achieving our stated year-end target of 16 EH/s," said CEO Zach Bradford. "Our planned expansions are proceeding according to timelines, with Washington expected to be fully operational next month and with the Sandersville land already graded and ready to start construction. Importantly, we’ve acquired 99% of the machines, either under contract or in transit, to fill these facilities. The addition of these machines into our fleet, most of which are Bitmain’s XPs, are expected to make us one of the most efficient miners on the network, positioning us to take optimal advantage of halving next year."
Riot Platforms (RIOT) also reported Q1 earnings on Wednesday with a loss per share of (33c) on revenue of $73.2M, which compared to analyst estimates of a loss per share of (17c) on a revenue of $76.04M. The company produced 2,115 bitcoin during Q1, which compared to 1,405 bitcoin during 1Q22. "Riot achieved a number of important milestones and records during the first quarter of 2023," said Jason Les, CEO. "In spite of damage to our immersion Buildings F and G during severe winter storms in Texas in late 2022, we successfully reached new all-time highs for miner deployment, total hash rate capacity, and monthly Bitcoin production. Our teams are also nearing completion of the final buildout and deployment of miners at our Rockdale Facility and have been working to further enhance operating efficiency."
On Thursday, Needham lowered the firm’s price target on Riot Platforms to $13 from $15 and kept a Buy rating on the shares. The analyst noted the company’s Q1 results missing estimates on revenue and adjusted EBITDA amid higher than expected costs associated with Riot’s hosting business. Direct self-mining costs declined, which was a positive, but this was offset by higher hosting costs and a declining margin in the engineering segment, Needham added.
BIT DIGITAL ADDS 14MW OF MINING CAPACITY: Bit Digital announced Tuesday that it has finalized agreements for an aggregate of 14 megawatts of incremental hosting capacity to power its miners. Bit Digital has reached an agreement with Coinmint to secure an additional 10 MW of hosting capacity. The hosting facility, located in Massena, New York, is operated by a subsidiary of Coinmint. This new agreement brings the company’s total contracted hosting capacity with Coinmint to approximately 40 MW. The agreement features an initial one-year term with automatic three-month renewals. Bit Digital intends to deliver approximately 3,600 recently purchased S19 mining units to the facility by the end of May. Bit Digital has also finalized an agreement for 4 MW of incremental hosting capacity with Blockbreakers. The facility, located in Canada, utilizes an energy source that is primarily hydroelectric. This new agreement brings the company’s total contracted hosting capacity with Blockbreakers to approximately 9 MW. The agreement features an initial two-year term with automatic three-month renewals. Bit Digital plans to fill the capacity with approximately 1,230 newly purchased S19j Pro mining units which are expected to be delivered to the facility and actively hashing by July. Additionally, Bit Digital has secured a side letter agreement with Blockbreakers, granting the company the right of first refusal for any future mining hosting services offered by Blockbreakers.
IRIS ENERGY UPGRADE: Cantor Fitzgerald analyst Josh Siegler upgraded Iris Energy (IREN) on Thursday to Overweight from Neutral with a price target of $7, up from $4. The company on its investor update call outlined a plan for an additional 1.0 EH/s of near-term expansion, which could increase its total hash rate to 6.5 EH/s, the analyst said. Iris has made significant strides in recovering its lost hash rate and restructuring the business for future growth, said the firm. It noted Iris has fully recovered its lost hash by utilizing pre-existing Bitmain prepayments, adding Iris "now has a strong line-of-sight to future growth."
U.S. EXCHANGES LIST CRYPTOS THAT SEC DEEMS ILLEGAL TO SELL: U.S. exchanges have listed over a dozen cryptocurrencies that the Securities and Exchange Commission has deemed illegal to sell, The Wall Street Journal’s Peter Santilli, Caitlin Ostroff and Dave Michaels according to TradeBlock.
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