Bitfarms Technologies Ltd., formerly Blockchain Mining Ltd., released interim results on August 30, 2018 that offered an unusually detailed view of industrial cryptocurrency mining during the market reversal of 2018. The Tel Aviv-listed company reported $22.3 million in consolidated revenue, $12.5 million in gross profit and $4.9 million in net income for the six months ended June 30, 2018. The interim financial statements were unaudited.
The filing mattered beyond one company’s earnings. It showed that expanding computing capacity did not insulate a miner from falling cryptocurrency prices or rising competition for block rewards. Bitfarms said Bitcoin network hash rate increased 138% between the beginning of 2018 and June 30, while its own hash rate grew 103%. Its expansion was substantial, but it still trailed the network’s growth rate.
What Bitfarms disclosed
The company attributed $21.1 million of its first-half revenue to cryptocurrency mining. That segment generated $12.3 million in gross profit, an officially reported 58% gross margin, and $6.2 million in net income.
Bitfarms said it mined 1,923 bitcoin, 2,222 bitcoin cash, 3,324 litecoin, 567 ether and 220 dash during the six-month reporting window. Those quantities describe the company’s multi-asset production; they should not be treated as bitcoin-only output or valued using a single date’s market prices.
The filing also documented the physical scale behind the results. Bitfarms reported approximately 27.5 megawatts of installed capacity and about 200 petahashes per second of installed hash power across four Quebec facilities. During the first half, it added approximately 6,500 mining computers and purchased $12.5 million of mining and electrical equipment.
Consolidated energy and infrastructure expense was $4.2 million, while depreciation and amortization reached $5.8 million. Those two categories illustrate why electricity-only estimates can materially understate the full accounting cost of mining.
The margin signal
Bitfarms reported a consolidated gross margin of 56%, down from 84% for the 56-day period ended December 31, 2017. Its mining-segment gross margin likewise declined to 58% from 84%. Management attributed the compression to lower average realized bitcoin sale prices and network difficulty increasing faster than company hash power.
The company reported an average realized bitcoin sale price of $9,400 for the six months ended June 30, 2018, compared with $13,700 during the 56-day 2017 period. These are Bitfarms’ realized sale figures, not market-wide daily closes. The comparison is also imperfect: one window covers six months and the other only the final 56 days of 2017.
Bitfarms separately presented a 66% mining EBITDA margin and an 80% “gross mining margin.” Both were non-IFRS measures defined by the company. They excluded some costs captured by conventional gross profit and therefore should not be substituted for the 58% mining-segment gross margin reported under the financial statements.
Why the filing mattered
The August 30 record demonstrated the operating leverage embedded in proof-of-work mining. More machines could increase a company’s hash rate and coin production, but network-wide competition determined its share of rewards. Cryptocurrency prices then determined what those rewards could realize when sold, while electricity, infrastructure, depreciation and administration continued to consume revenue.
It also showed the institutionalization of mining. Bitfarms was combining public-company reporting, industrial power agreements and purpose-built Quebec facilities rather than operating as a small speculative mining venture. At the same time, the filing warned that its securities were highly speculative and that cryptocurrency-price volatility could materially affect operations.
Record limits
The central figures are issuer-reported, and the June 30 interim statements were unaudited. The August 30 release did not establish the profitability of other miners, the economics of any individual Bitcoin miner or the market value of the coins when produced. It supports a narrower conclusion: during the first half of 2018, Bitfarms remained profitable while its reported margins contracted as realized bitcoin prices fell and network competition outpaced its own expansion.
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