Cathedra Bitcoin Transitions from Mining to Data Center Focus

Cathedra Bitcoin Shifts Focus from Mining to Data Centers

It was Michael Saylor who first made waves by encouraging large corporations to invest in Bitcoin (BTC) through his company MicroStrategy. In an unexpected turn, Marathon Digital (MARA), one of the largest Bitcoin mining firms, adopted a similar strategy. Now, another player in the mining sector is making a notable shift: Cathedra Bitcoin (CBIT). This company, initially focused on mining, has announced a change in its business model aimed at developing data centers. The profits generated from this new direction will be used to purchase Bitcoin rather than relying on mining operations.

In a statement, Cathedra Bitcoin acknowledged, “The last three years have demonstrated to us that Bitcoin mining is not a reliable way to grow shareholders’ Bitcoin per share.” The firm emphasized its primary objective is to accumulate more Bitcoin for its shareholders. During the bullish market of 2021, mining was viewed as a more advantageous way to obtain Bitcoin at a lower cost compared to purchasing it directly from the open market. The high-profit margins and relatively low barriers to entry made it an attractive venture. However, this landscape drastically changed in the aftermath of the recent crypto winter, the approval of exchange-traded funds (ETFs) in the U.S., and the Bitcoin halving event, which halved the rewards for miners, increasing competition in the industry.

Currently, miners are facing significant challenges in maintaining operations and accruing Bitcoin at favorable prices. In contrast, other publicly traded companies, particularly MicroStrategy (MSTR), are being rewarded by investors for their proactive purchasing strategies in the open market. Cathedra Bitcoin pointed out, “Indeed, nine of the 10 largest (by market capitalization) publicly listed Bitcoin mining companies hold less Bitcoin per share today than they did three years ago.” This trend underscores the difficulty many miners are experiencing, including Cathedra itself.

To adapt to these changing circumstances, Cathedra Bitcoin plans to pivot towards developing and operating data centers, which present more stable cash flow opportunities. The firm has merged with Kungsleden, a company specializing in alternative high-density compute infrastructure, to further this objective. According to Cathedra, “By repositioning the company away from the Bitcoin mining business, toward one with more predictable cash flows and which generates attractive returns on capital – developing and operating data centers – we believe our recent merger with Kungsleden will enable Cathedra to generate meaningful growth in Bitcoin per share over time.”

Moreover, Cathedra is exploring various funding avenues, including debt, equity, and Bitcoin-linked derivatives, to acquire more Bitcoin. As of now, the company holds 43 Bitcoin on its balance sheet. While Cathedra will not completely abandon its mining operations, it is clear why the company is pivoting toward this new business model. Recently, other miners such as Core Scientific (CORZ) and Applied Digital (APLD) have seen their stock prices rise after diversifying into high-performance computing (HPC) and artificial intelligence (AI) hosting services.

On the other hand, mining firms that have not fully committed to the HPC or AI sectors continue to face downward pressure on their stock prices. This is largely due to the network hashrate, a metric that measures the overall competitiveness of the network, reaching all-time highs while profitability for miners declines. According to JPMorgan, the hashprice, which indicates a miner’s daily profitability, has decreased by 2% this month, falling over 50% below pre-halving levels. Jefferies reported that Bitcoin mining was significantly less profitable in August compared to July, and the outlook for September appears equally challenging due to the rising hashrate.

In summary, Cathedra Bitcoin is taking a decisive step away from the volatile mining business and towards a more stable and profitable avenue by focusing on data centers. This strategic shift aims to ensure long-term growth in Bitcoin accumulation for its shareholders.