Shares of Bit Digital (BTBT -6.57%), a company in China that mines popular cryptocurrency Bitcoin (BTC -1.35%), were bouncing back today following months of steady declines. As of 10:30 a.m. EDT on Thursday, the stock was up 9%. And it's likely because the price of Bitcoin isn't crashing today, like it was yesterday.
Bitcoin took a big step back yesterday after the People's Bank of China reportedly told its citizens that cryptocurrencies can't be used as a form of payment. For perspective, Bitcoin was almost at $65,000 just last month. Yesterday, following the news from China, it briefly dipped below $35,000 -- nearly halved in a very short amount of time. Companies like Bit Digital have been slumping as a result.
However, Bitcoin has recovered from yesterday's lows and currently has a price around $42,000. That's helping some cryptocurrency stocks like Bit Digital recover today.
There's a real-world cost to mining cryptocurrencies. In 2020, Bit Digital mined 1,510 Bitcoin tokens, according to filings with the Securities and Exchange Commission. But that Bitcoin didn't come free. It cost $14.1 million to mine it, implying a break-even price of $9,340 for the year.
For the first quarter of 2021, Bit Digital was able to increase the amount of Bitcoin it mined, raising it to 1,013 for the quarter. However, its costs also went up because it's running more equipment now. Its cost of revenue was almost $12.5 million, implying a break-even price of around $12,300 per Bitcoin.
Therefore, Bit Digital still has plenty of breathing room to be profitable on a gross-profit basis at the current price of Bitcoin. However, with costs going up to increase its mining power, the company would certainly benefit from a continued recovery in the cryptocurrency market.