Bitcoin's (BTC 0.87%) soaring share price -- up more than 357% in the past 12 months -- has driven a huge increase in interest in mining the coin for profit. Unfortunately, there's one big hurdle for those who'd like to get in on the action: The cost of the machines used to mine coins runs about $16,000 each -- and it's not as if you need just one of them.
But investors don't have to lay out a small fortune to start mining. What's much more accessible is investing in Bitcoin mining companies that already have rigs set up. One such promising venture is Hut 8 Mining (HUT), which has soared by more than 1,000% in the past year.
Why Hut 8 Mining?
Much of Hut 8's appeal lies in its plans to scale up its mining operations to perform 2.5 quintillion guesses per second -- a measurement known as the hash rate -- in search of the mathematical solution needed to mine a new block on Bitcoin's blockchain. This equates to 1.78% of the network's hash rate and is a huge improvement over Hut 8's 1 quintillion (an exahash) per second hash rate last year. The company mines between 12 and 18 Bitcoins per day, worth between $518,000 and $778,000 at recent Bitcoin prices.
During the second quarter of 2021, Hut 8's revenue increased by a stunning 263.5% from a year earlier to $33.55 million Canadian dollars. At the same time, its operating income increased by 230.2% to CA$8.12 million.
Right now, it owns about 4,450 BTC, valued at about $219.5 million, but unlike other miners, it doesn't plan on simply selling them as soon as possible. To maximize shareholder returns, Hut 8 lends out the BTC it mines. Coin owners can receive as much as 6.20% interest per year from Bitcoin lending, based on current rates.
If that wasn't enough, the company plans to take its operations to another level. Hut 8 now has about 144 megawatts (MW) of power capacity, the equivalent of about 86 power turbines operating at low performance. But by 2022, it will expand that number to 209 MW. With more power, the company will be able to operate more mining rigs and, as a result, further increase revenue and earnings.
On top of that, Bitcoin's network use is about to rise. In November, the long-awaited Taproot upgrade will go live on its blockchain. Taproot will reduce transaction fees and improve the network's privacy, greatly encouraging its use in the fast-evolving cryptocurrency markets.
It's no secret that the Bitcoin network consumes a lot of energy. In fact, one Bitcoin transaction uses as much electricity as 1.2 million Visa transactions. As a result, Bitcoin miners that rely on coal power plants for electricity have come under intense scrutiny, especially in China.
Hut 8's operations are more environmentally sustainable than much of the competition's. The company's mining rigs are located in Alberta, Canada, and use electricity generated by a mix of natural gas, wind power, and solar energy. What's more, Hut 8's mining rigs cost only $0.022 per kilowatt hour to operate, which is the cheapest among publicly traded BTC mining companies.
Because of its fast revenue growth, Bitcoin lending, solid margins, and sustainability, Hut 8 is a cryptocurrency mining stock that you don't want to miss out on. Even with the stock trading at 10 times revenue, the valuation is well worth it, considering its future expansion plans and Bitcoin's pending network overhaul.
Correction: A previous version of this article stated one Bitcoin transaction uses as much electricity as 12 million Visa transactions. It has been revised to reflect the actual equivalent, 1.2 million.