Cycle Trading: BitDeer’s original intention, rebirth, and leap

Original author: Joy Lou

BitDeer (stock code BTDR in the US) updated its operating figures for November. The market-focused A 2 mining machine (Sealminer A 2) began mass production, with the first batch of 30,000 units sold to the outside world.

The first growth curve: self-developed chips, sales of mining machines, and self-operated mining farms

The ability to develop chips on its own has always been the core competitiveness of mining machine manufacturers. Xiaolu successfully completed the production of A2 mining machine chips and A3 mining machine chips in the past six months.

Figure 1: BitDeer Technology Roadmap

Source: BitDeer official website

Figure 2: BitDeer main mining machine parameter prediction

Source: Model forecasts, company guidance

According to public information, the current operating parameters of the A2 mining machine are at the historical leading position among all the mining machines currently on sale and in operation on the market. Although the A3 has not yet been officially released, judging from the known parameters, it will become the worlds largest single hash computing power mining machine with the leading energy efficiency ratio. The possibility of this product being sold to the outside world in the short term is extremely low, and it will be used first to deploy self-operated computing power.

Figure 3: The latest mining machine companies and mining machine parameters in the world

Source: Bitmain, BitDeer, Shenma Miner, Canaan Technology official website

In terms of power plants, as of the end of November, the company has completed the deployment of 895 MW of power plants in the United States, Norway and Bhutan. There are also 1,645 MW projects under construction, of which 1,415 MW will be completed in mid-to-late 2025. According to the minutes of Guoshengs conference call, the company has set up a special department to acquire more power plant projects, and it is expected to add more than 1 GW of power plants in 2026; the average electricity price of all self-operated power plants is less than US$0.04/kWh, which is absolutely leading compared with its peers.

Figure 4: BitDeer’s built and under-construction electric fields

Source: Company website

Given the above operating figures, the BitPath 1 EH/s model is as follows:

Figure 5: BitDeer single EH/s model

Source: Model predictions

The key assumptions of the model include that the mining machine depreciation period is 4 years (5 years under North American financial standards), the electric field depreciation period is 15 years (20 years under North American financial standards), and other costs (including manual operation and maintenance, etc.) account for 5% of revenue (the companys historical operating figures are only 1-1.5%). According to the model, the shutdown price of BitDeers self-operated mining farm is 35,000 US dollars in Bitcoin.

Figure 6: Relationship between pre-tax profit margin of BitDeer’s self-operated mining farm and Bitcoin price

Source: Model predictions

When the price of Bitcoin exceeds $150,000, the pre-tax profit slope of BitDeers self-operated mine will exceed the rate of increase of Bitcoin. If the price of Bitcoin reaches $200,000, the pre-tax profit margin of BitDeers self-operated mine will be close to 80%.

Regarding BitDeer’s first growth curve, the market still has two major concerns:

1. Regarding the ratio of mining machine sales and self-use. As mentioned earlier, Xiaolu is expected to reach a power field reserve of 2.3 GW by mid-2025. If all the above mines are equipped with A 3 mining machines, the self-operated computing power will be close to 220 EH/s. According to the linear growth of the total network computing power, it will account for about 20% of the total network computing power by the end of 2025. According to the companys 2024 third quarter report, the company has cash and general equivalents of US$291 million, and completed US$360 million convertible bonds at the end of November. With the addition of US$40 million options, the company currently has about US$690 million in cash on hand. According to the companys power field investment and self-operation needs, due to the time difference between the laying of self-operated computing power and output, it may need to raise funds again, but Xiaolus current stock price is undervalued, and the company is not willing to issue additional shares. Therefore, based on cash flow demand, 10,000 4 nm wafers can generate an annualized net cash flow of US$480 million (calculated based on 4 months of mining machine turnover). If this cash flow is reinvested into self-operated computing power (all equipped with A3 mining machines), the computing power will increase by 60 eh/s. After 2025, Xiaolus overall cash flow will no longer be a problem, and the sales of mining machines plus the mining business can ensure that the Bitcoins produced by Xiaolu are no longer used for sales, but for self-sustaining.

Figure 7: Operating cash flow derivation model

Source: Model predictions

2. About the competitive relationship between Bitmain and Deer. The core of commercial competition is still the performance of mining machines and the cost of self-operated computing power. According to public data and laboratory data, Deer has sufficient competitive advantages in both the mining machines it has produced and the cost of self-operated computing power. With the development of high-end process chips, mining machines, as the downstream of the industry, will also be affected by the upstream competition pattern.

Second growth curve: AI computing power

In addition to mining machine sales and self-operated mining farms, the companys operating figures in November showed that it had begun deploying Nvidia H200 chips in the TIER 3 data center of intelligent cloud services for AI computing power construction.

Mr. Wu Jihan wrote an article titled “The Beauty of Computing Power” in 2018: Computing power may be an effective means for humans to reach a higher civilization, and it is also the most effective way to fight against entropy increase. The original intention remains.

According to the Tianfeng Research Report, the power deployment plan of major Bitcoin mining companies in North America currently exceeds 1 GW, 3,471 MW has been powered, and 5,969 MW is expected to be completed by 2028. The above power deployment will meet 56% of the power demand of North American data centers. BitDeer said in a Tianfeng conference call on December 6 that it will deploy Nvidias high-end chips with at least 200 MW of power in the short term, and start serving customers such as MEGA 7 for cloud calls, emulating the COREWEAVE model.

Investment advice and valuation

The right time, the right place and the right people are the best description of investing in BitDeer at the current point in time. The company has accumulated strength and is ready to make a breakthrough. The first growth curve and the second growth curve are expected to rise simultaneously, forming a synergy. It is the most cost-effective target among the current US mining stocks.

However, how to value a company and how to défine the companys value in a profit model are challenging. Neither the profit valuation generated by the sale of mining machines alone nor the valuation of self-operated mines is sufficient to cover Xiaolus actual operating conditions. Therefore, two types of business models are fitted as follows:

Figure 8: Calculation of BitDeer Miner Sales Model

Source: Model predictions

Figure 9: BitDeer self-operated mining farm prediction model

Source: Model predictions

The current average valuation of 170 million USD/EHs for mainstream mining companies in North America is the closest to the market consensus. It is reasonable to believe that in the next two years, Xiaolus actual self-operated mines will reach between 120 and 220 EH/s, with a market value of approximately US$20.4 billion to US$37.4 billion, which is 4.8 to 9.7 times higher than the current share price.

Figure 10: Valuations of major North American mining companies

Investment risks:

1. Bitcoin price fluctuation risk;

2. TSMC wafer risks caused by sanctions.

This article is sourced from the internet: Cycle Trading: BitDeer’s original intention, rebirth, and leap

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