Bitfury’s $1 Billion Valuation Reveals Strength in Bitcoin Mining Market

A few days ago, Mike Novogratz and Korelya Capital invested $80 million in Bitfury, a Bitcoin mining equipment manufacturer and blockchain software firm. This investment is on the heels of the firm’s release of Bitfury Clarke, a new Bitcoin ASIC miner designed to compete with Bitcoin’s 7mm Antminer.

Increased Mining and Blockchain Activities

The hash rate of the Bitcoin blockchain network has moved from 15 million TH/s to over 50 million TH/s in the last four months, despite the sideways market of Bitcoin (BTC) and the 70 % slide experienced by the cryptocurrency value market since January. This describes the strength of the blockchain’s computing power and has led to a surge in the break-even cost of crypto mining.

Blockchain pegs the hash rate of Bitcoin at above 50 million TH/s; a 42 percent increase since July when the break-even cost of Bitcoin mining was calculated based on 35 million TH/s. However, to cryptocurrency analyst Barclay James reported the break-even cost has well surpassed $7,500 even in regions where naturally cold climates and cheap electricity reduces operational costs:

“China has some of the world’s cheapest electricity rates as well as average temperatures consistent with temperate regions. This is important as cooling is one of the largest overheads in mining. In addition, the country’s generally low operating costs also give it a competitive advantage,”

Miners will continue generating BTC at a significant loss until BTC leaves the $7,000 resistance level and moves to around $7,800 to $8,000.Yet, the demand for mining-focused ventures like Bitfury, Bitmain, and Samsung’s new foundry is on the rise, as is the hash rate of Bitcoin, Ethereum, and other major cryptocurrencies. Indeed, Bitfury CEO, Valery Vavilov, asserted that the past 11 months have seen a significant increase in the demand for blockchain and crypto from companies and public institutions.

Mining Companies’ Money Spinning Business Models

Bitmain is rounding up a $15 billion IPO while Bloomberg has announced its target valuation of $3 to $5 billion should Bitfury get an IPO.

The investments made by Korelya,  a major venture capital outfit, is considered confirmation of the strength of the Bitcoin mining industry and has assured investors like TSMC and Samsung of its sustained development. Korelya is financed by Naver, the largest search engine operator in South Korea.