On Sept. 19, Hut 8 announced a major hosting agreement with Bitmain, aiming to generate $125 million annually. H.C. Wainwright analysts view this move positively as management shifts to an offensive strategy and carries out a significant deal. Under the agreement, Hut 8 will deploy up to 15 exahashes per second (EH/s) of Bitmain’s U3S21EXPH ASIC miners by Q2 2025 at its new Texas-based site.

Boosting Self-Mining Capacity

Mike Colonnese, H.C. Wainwright’s crypto analyst, anticipates that this option could lift Hut 8’s self-mining hash rate from 4.7 EH/s to 19.7 EH/s, solidifying the company’s market position. Colonnese highlighted that the next-generation miners, featuring direct liquid cooling, are expected to triple computing power compared to existing models, offering a significant efficiency boost.

Strategic Purchase Option

The agreement grants Hut 8 the option to purchase all deployed rigs within six months of activation at a competitive $21 per terahash. This allows the company to scale its self-mining operations effectively.

This unique hosting arrangement and miner purchase option structure provides Hut with three key benefits: 1) stable, recurring hosting revenues from Bitmain that are not tethered to BTC price fluctuations, 2) the optionality to purchase and immediately convert up to 15 EH/s of the latest-gen rigs to the company’s self-mining fleet, which had a below-average efficiency rating of 31.7 J/TH as of 2Q24, and 3) reduces upfront capital requirements.

H.C. Wainwright analysts

Stable Revenues Amid Bitcoin Volatility

This partnership provides Hut 8 with stable, recurring revenues from Bitmain while mitigating Bitcoin price volatility. Additionally, the custom-built data center design, optimized for high-performance computing, will support up to 180 kilowatts per rack, ensuring operational synergies and future cost savings.

With a projected 57% gross margin from this deal, Hut 8 is poised to enhance profitability despite recent Bitcoin price fluctuations. Hut 8’s stock climbed 3.7% following the news, with market observers expecting further gains as the company completes its expansion.

Strong Financial Position

The analysts reiterated a “Buy” rating, with a price target of $13.50, highlighting the company’s ability to self-fund the buildout using its $175.5 million cash reserve and 9,105 BTC holdings, valued at $558.2 million.

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