What is Cango Inc. doing in the Bitcoin mining space?
Cango Inc. is stepping into Bitcoin mining. They’re acquiring 32 Exahashes per second of hashrate from Bitmain Technologies for a whopping $256 million. This puts them on the map as a major player in the global Bitcoin mining world.
How did they pull this off?
In November, the company managed to pull 363 Bitcoin from the network, equating to around $36 million, without selling off any of their mined coins. This made them the fifth largest public Bitcoin miner by realized hashrate and the third largest by deployed hashrate. Their production accounts for 4% of daily BTC mined worldwide.
Where is the backing coming from?
Cango's venture into Bitcoin mining is bolstered by strategic acquisitions and partnerships. Their initial purchase from Bitmain is hosted in the U.S. as per an 18-month colocation agreement. This allows them to house their hardware in a secure location without the need for their own data centers, a significant advantage since China imposed a Bitcoin mining ban back in May 2021.
Despite the ban, Chinese mining pools are said to control 55% of the global BTC hashrate. Cango plans to add another 18 EH/s from Golden TechGen, owned by a former Bitmain CFO. They will pay $144 million in common stock to complete the deal, potentially raising Cango’s total hashrate to 50 EH/s.
What are the financial implications?
They seem to have entered the mining scene at just the right time, with BTC prices hovering near $100,000 and the network hashprice rising to $63 per PH/s. Changing gears from automotive services, Cango originally started as a motor vehicle transaction service provider in 2010, pivoting to car trading recently.
Cango is expecting the revenue from Bitcoin mining to eclipse its $3.84 million Q3 revenue, thanks to their initial production. Their stock price surged from $3.41 to $6.91, pushing their market cap to half a billion dollars.
What does this mean for crypto investments?
Cango’s success could shape how regulated markets view crypto investments. Their NYSE listing and strong production results may build confidence in regulated cryptos. By holding onto their mined BTC instead of selling, they appear to expect prices to rise in the long run.
Their operational efficiency suggests that traditional investment firms might find stability in crypto investments.
What can European SMEs learn from Cango's move?
European SMEs can take several lessons from Cango's foray into crypto mining. The company diversified its revenue streams by venturing into the mining sector, a strategy that could help ensure sustainability and growth.
Understanding and adhering to regulations is crucial when incorporating crypto assets into their strategies, allowing them to navigate the space efficiently.
Strategic partnerships and technology integration can streamline operations and cut costs.
Lastly, tokenization and real-world asset integration can provide alternate funding options and liquidity sources for SMEs.
Summary
Cango's bold entry into Bitcoin mining showcases the potential for traditional companies to successfully transition into crypto. Their success could alter perceptions of crypto investments and provide other companies with valuable insights on entering the space.
