Crypto Currents: Coinbase acquires Utopia Labs team

As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.

COINBASE ACQUIRES UTOPIA LABS TEAM: On Wednesday, Coinbase (COIN) announced the Utopia Labs team is joining Base to help accelerate its onchain payments roadmap within Coinbase Wallet. In a blog post, Jesse Pollak, head of Base and Coinbase Wallet, said, “The Utopia team has been on the ground floor building onchain payments products for years. We’re pumped for them to join us to accelerate our goal of bringing low-cost, fast, and global payments to everyone around the world. Stablecoins amounted to $8.5T in transaction volume across 1.1 billion transactions Q2 2024, and continuing to improve the user experience will be crucial as stablecoin payments continue to grow. Together, we’ll create a future where individuals and businesses large and small use onchain payments to make their lives better every day.”

Additionally on Tuesday, Coinbase announced the launch of the Coinbase 50 Index, a regulated crypto benchmark developed in partnership with Coinbase Asset Management and Market Vector Indexes. The Coinbase 50 Index, rebalanced quarterly, is a market cap-weighted index of the top 50 assets that meet the index’s criteria. Traders can use the index to track the performance of the broader crypto market and benchmark their returns.

The company said, “The index methodology builds on the three-year track record of Core Coinbase Indices, which have been modeled by Coinbase Asset Management. This approach scrutinizes eligible assets based on fundamental criteria such as token economics, blockchain architecture, and security. Furthermore, every asset within the COIN50 index is listed and accessible on Coinbase Exchange, which has a rigorous vetting process that evaluates assets against legal, compliance, and technical security standards. While the Coinbase 50 Index currently covers ~80% of the total crypto market cap, this is just the beginning.  As the cryptoeconomy market matures, our goal at Coinbase is to launch a significantly broader index, to align with the growing size and diversity of the crypto market.”

NY COURT RULES IN FAVOR OF GREENIDGE:  Greenidge Generation Holdings (GREE) issued a statement on Thursday regarding the ruling from New York Supreme Court Judge Vincent Dinolfo rejecting the New York State Department of Environmental Conservation’s action to deny Greenidge’s application for renewal of a Title V Air Permit. Greenidge’s operations at its New York facility will now continue uninterrupted. Judge Dinolfo stated in his ruling annulling DEC’s action: that DEC “acted in a manner that was both affected by errors of law and arbitrary and capricious”; the “Final Denial had no rational basis for its decision to forgo CLCPA § 7(2)’s justification analysis”; and the State’s “interpretation of the analysis required under CLCPA Section 7(2) is flawed”.

The company said, “Transparent political bias lost today. Facts and the rule of law won. The ruling ensures our facility will continue operating and our local employees will not have their careers ripped away by politically motivated governmental overreach that had no basis in law from the first day it began. The Climate Act is a good and well-intended law, but it did not give DEC political appointees and bureaucrats the power to rewrite a statute and unilaterally decide for themselves the value of working-class New Yorkers’ jobs. They tried hard, in concert with their allies in the advocacy community for whom truth was a bridge too far, but no amount of spin could change that fact. The damage caused to our company and employees by the recklessness of the DEC and all those who lied about our operation is real, and today the Court set the record straight – we were right, and the state and its allies were wrong…This decision highlights the growing importance of data center operations – whether supporting AI, digital currency, cloud computing, or other high-tech businesses – and how we can bring modern career paths to Upstate New Yorkers, who have waited far too long for the opportunity. Our facility shows this region can create future-focused data center jobs and economic activity by utilizing power behind the meter – and provide power to the electrical grid everyday – while also meeting the state’s ambitious climate goals. Going forward, we hope the DEC will listen to the Court and begin working collaboratively with Greenidge to finalize a new permit, consistent with the court’s rebuke of the State’s decision and for the benefit of New York State.”

CORE SCIENTIFIC INITIATED WITH BUY: Roth MKM initiated coverage of Core Scientific (CORZ) on Thursday with a Buy rating and $25.50 price target. The company’s strategic shift and diversification to high-performance-compute infrastructure, alongside ongoing BTC mining, provides a clear path to stable and predictable cash flow growth, the analyst said. With an improved capital structure, Core Scientific is well-positioned for future growth, customer diversification, and enhanced financial stability, driving profitability in a dynamic digital infrastructure market, the firm added.

Additionally on Thursday, Macquarie raised the firm’s price target on Core Scientific(CIFR) and Riot Platforms (RIOT), missed market forecasts for revenue and adjusted EBITDA in Q3 on network difficulty. However, recent refinancing provides dry powder for site optimization and the company is focused on expanding its portfolio via more power at existing sites and acquisition of new sites, including greenfields, the analyst said. The re-rating in the sector drives the increase in the firm’s price target, the analyst added.

Meanwhile on Friday, BTIG raised the firm’s price target on Core Scientific to $19 from $15 and kept a Buy rating on the shares. The analyst cited the positive impact of bitcoin approaching $100K while noting that even the higher cost producers are generating positive mining margins.

BTIG also raised the firm’s price target on Cipher Mining to $9 from $6 and kept a Buy rating on the shares.

CANAAN SIGNS MINER AGREEMENT WITH HIVE: Canaan (CAN) announced Monday that Canaan Creative Global has entered into a purchase agreement with HIVE Digital Technologies (HIVE), for its Avalon A1566 miners. CCG will provide HIVE with 6,500 Avalon A1566 miners, with an average computing power of 185 Terahash per second. Of the 6,500 A1566 miners, 500 miners have been immediately delivered and are scheduled for installation. The remaining 6,000 machines will be delivered in four monthly shipments of 1,500 units, from December 2024 through March 2025. 

CRYPTO EARNINGS: Meanwhile on Wednesday, HIVE Digital reported a second quarter loss per share of (6c) on revenue of $22.6M, which compared to analyst estimates of a loss per share of (9c) on revenue of $25.62M. Darcy Daubaras, HIVE’s CFO, stated, “HIVE has delivered a solid quarter, demonstrating consistent revenue, a 50% year-over-year increase in our HODL position, and strong EBITDA growth. This performance is especially noteworthy given the April 2024 Bitcoin Halving, which halved Bitcoin rewards for transaction security. Our ability to maintain stability amidst this event underscores HIVE’s operational excellence and proactive strategy.”

H.C. Wainwright raised the firm’s price target on HIVE to $8 from $5 and kept a Buy rating on the shares following the “mixed” fiscal Q2 report. The company’s mining capacity is set to double by summer of 2025, the analyst said. The firm believes a large artificial intelligence deal is imminent given HIVE Digital’s expertise, track record of operating GPUs and the company’s near-term tier three data center capacity, and would expect any such deal to be a positive catalyst for the stock.

Meanwhile, Canaccord raised the firm’s price target on HIVE to $7 from $6 and kept a Buy rating on the shares. The firm said the company continues to deliver steady progress across the different facets of its business and said despite being lower in the broader exahash pecking order of publicly traded peers, the company has amassed a very nice BTC HODL while others have not.

Additionally, Northland raised the firm’s price target on HIVE to $7 from $5.50 and kept an Outperform rating on the shares. HIVE self-mined 340 BTC and ended the quarter with 5.6 EH/s, while the $20M ARR target was pushed back to the first half of 2025 from the second half of 2024, noted the analyst, who cited improving visibility into 2025.

Bitfarms (BITF) also reported earnings on Wednesday with a Q3 loss per share of (8c) on revenue of $45M, which compared to analyst estimates of a loss per share of (10c) on a revenue of $48.8M. “As previously communicated, 2024 has been a transformative year for Bitfarms,” stated CEO Ben Gagnon. “Year-to-date, we’ve refreshed nearly our entire fleet of miners, significantly improving our mining economics, acquired one new site and entered agreements to acquire two additional new sites in the U.S., and completely revamped our operational and Board structure, strengthening our leadership and corporate governance. We are now uniquely positioned with a strategic pipeline of over 950 MW in 2025 with nearly half a gigawatt of power infrastructure unallocated with miners. This represents a massive, secured, and cost-effective near-term growth opportunity with the flexibility necessary to maximize shareholder value as we approach the anticipated 2025 Bitcoin bull cycle.”

On Thursday, Hut 8 (HUT) reported Q3 EPS of 1c on revenue of $43.7M, which compared to a loss per share of (10c) on revenue of $21.7M last year. The company mined 234 bitcoin at a weighted average revenue per bitcoin mined of $61,025, compared to a cost to mine of $31,482 and holds 9,106 bitcoin in reserve with a market value of $576.5M. “This quarter, we executed several strategic initiatives designed to drive topline growth and strengthen our competitive position in both AI and Bitcoin mining,” said Asher Genoot, CEO. “Key initiatives—including a ~15 EH/s colocation partnership with BITMAIN, the go-live of our GPU-as-a-Service vertical, and the elimination of significant interest expenses through the equitization of our Anchorage Digital loan—are projected to generate nine figures in new annualized revenue and reduce interest expenses by more than $17M over three years.”

Following the report, Craig-Hallum raised the firm’s price target on Hut 8 to $32 from $15 and kept a Buy rating on the shares. The firm really likes the team’s philosophy around the building of their power pipeline. Management is agnostic about everything other than the ultimate return for shareholders but is also very focused on flexibility. That is shown well in its buildout of the Vega project, which is built for an ASIC use case for a very palatable $400K per MW but can quickly be redeployed for an AI use case through the addition of redundant power, Craig-Hallum noted. They are already equipped with high rack density and liquid to chip cooling, both key to the AI application. “It doesn’t hurt to have about 9100 Bitcoins in your stack to throw up on the bar to demonstrate your wherewithal either,” the firm adds.

Meanwhile, Benchmark raised the firm’s price target on Hut 8 to $32 from $17 and kept a Buy rating on the shares. The Q3 report underlined the fact that Hut’s efforts to build out and commercialize its next-generation digital infrastructure platform have accelerated during the past few months, said the analyst, who sees the company’s growth prospects in both the AI compute and bitcoin mining spaces continuing to strengthen.

Additionally, Needham raised the firm’s price target on Hut 8 to $32 from $21 and kept a Buy rating on the shares. The company saw a surprise EPS beat as it moves from one of the highest cost bitcoin producers to one of the lowest, while its recent efficiency improvements and lower power costs bode well for EBITDA growth through FY25, the analyst said.

On Tuesday, Mara Holdings (MARA) reported a Q3 loss per share of (42c) on revenue of $131.65M, which compared to analyst estimates of a loss per share of (25c) on a revenue of $151.67M. The company said, “In Q3 2024, we celebrated several key achievements towards establishing MARA as a leader in energy transformation. We leverage energy-efficient high-performance compute to process bitcoin network transactions, with the end goal of accumulating bitcoin.”

Following the report, H.C. Wainwright analyst raised the firm’s price target on Mara Holdings to $28 from $27 and kept a Buy rating on the shares.

Additionally on Tuesday, TeraWulf (WULF) reported a Q3 loss per share of (6c) on revenue of $27.06M, which compared to analyst consensus of a loss per share of (3c) on revenue of $34.28M. The company self-mined 442 bitcoin at the Lake Mariner Facility. “The third quarter and the beginning of the fourth quarter marked a pivotal turning point for TeraWulf, as we delivered strong results across our strategic, financial, and operational objectives,” said Paul Prager, CEO. “The sale of our interest in the Nautilus joint venture not only generated a substantial return but also sharpened our focus on scaling high-performance computing at Lake Mariner. Securing an expanded ground lease with exclusive rights to 750 MW of infrastructure capacity is a significant milestone in our growth strategy. Combined with the success of our $500M capital raise, we are exceptionally well-positioned to seize new opportunities in both Bitcoin mining and HPC hosting as we enter 2025.”

On Wednesday, Roth MKM raised the firm’s price target on TeraWulf to $11 from $7.50 and kept a Buy rating on the shares. The firm is updating its model as the company is in advanced negotiations for its 72.5MW of HPC capacity, which should see an announcement by year-end, the analyst said. That capacity amounts to about $92M in annual recurring revenue, and with TeraWulf’s enhanced balance sheet, enabled further potential high-performance computing scale via free cash flow and future project financing, Roth added.

Meanwhile, Northland raised the firm’s price target on TeraWulf to $10 from $8 and kept an Outperform rating on the shares after the company reported Q3 revenue and adjusted EBITDA that missed the firm’s estimates. TeraWulf is now fully funded to execute its growth plans through 2025, targeting about 250 MW of HPC by year-end 2025, noted the analyst, who expects one to two high-performance computing, or HPC, customers to be secured by year-end 2024.

CRYPTO STOCK PLAYS: Publicly traded companies in the space include Bit Digital (BTBT), Coinbase, Core Scientific, Greenidge Generation, Mara Holdings, MicroStrategy (MSTR), Riot Platforms, Stronghold Digital Mining (SDIG) and TeraWulf.

PRICE ACTION: As of time of writing, bitcoin rose about 15% this week to $88,196 in U.S. dollars, according to CoinDesk.