Don't Fret Bitcoin Volatility, Embrace It

NEW YORK, Dec. 15, 2021 /PRNewswire/ -- Volatility is a part, a necessary one as it happens, of any market, especially emerging markets such as cryptocurrency. That said, big swings aren't deterring people from investing in the new asset class by any stretch of the imagination. In fact, people are jumping on the crypto/blockchain bandwagon in droves. In a survey this summer by Bakkt, nearly one-half of the 2,000 respondents said that they have invested in cryptocurrency this year, even if only a few dollars, with more than one-third of those not in yet saying that they are interested in joining the mix. While volatility — Bitcoin went from $68,978 to $43,563 in 24 days recently — is certainly prevalent, it doesn't scare off investors in a market that has exploded on the scene in recent years. It hasn't slowed businesses from investing in new technology either, with companies such as ISW Holdings Inc. (OTC: ISWH) (Profile) actively expanding core offerings as it establishes itself as one of the largest mining and hosting providers in the North America digital currency market. Fortunately, investors are afforded an array of investment options outside of cryptocurrency itself, with diversity strategies available through a variety of companies and funds, including Bakkt Holdings Inc. Class A (NYSE: BKKT), HIVE Blockchain Technologies Ltd (NASDAQ: HIVE), ProShares Bitcoin Strategy ETF (NYSE ARCA: BITO) and MicroStrategy Incorporated (NASDAQ: MSTR).

• ISW Holdings is nearly ready to go live with phase 1 of Pod City, a mining complex that will pair 56,000 Bitcoin miners to 200 megawatts of power.
• ISWH has relationships with leaders in cryptocurrency mining and municipalities, giving it a competitive edge to control operating costs.
• Ahead of Pod City's opening, ISWH is already showing improved fundamentals, with 560 miners in operation generating $1.075 million in revenue during Q3.
• Pod City is expected to be fully connected in Q4 2022, with management targeting $10+ million per month via hosting services contracts.

Click here to view the custom infographic of the ISW Holdings Inc. editorial.

Power Play

Cryptocurrency miners are integral to the market, as they are the means by which new coins enter circulation. Take Bitcoin for example. Bitcoin miners solve extremely complicated math problems to verify transactions in the cryptocurrency. Solving the problem results in a new data for a block, which is added to an immutable decentralized ledger known as the Bitcoin blockchain. Each block holds one megabyte of Bitcoin transaction data. For work successfully mining a Bitcoin, the miner is rewarded a predetermined amount of Bitcoin, with the reward halved when 210,000 Bitcoins are mined globally, which happens about every four years.

There is a common thread among Bitcoin miners: high costs related to massive power consumption. Crypto mining is a numbers game insomuch that the more computing power used, the more Bitcoin will be mined. The banks of computers that are running full-out every minute of every day are energy hogs, gobbling up some 91 terawatt-hours of electricity each year as an industry. To lend some color, that is more energy consumption than all of Finland uses annually. Unsurprisingly, companies are looking at all forms of innovation to minimize energy expenses and widen their profit margins.

ISW Holdings Inc. (OTC: ISWH), which is in the process of changing its name to BlockQuarry, is a Nevada-based portfolio company with primary commercial-stage operations in cryptocurrency mining. The flagship asset of ISWH is its Pod City complex that, when complete, will pair 200 megawatts (MW) of power with 56,000 crypto mining rigs. In addition to its mining business, ISWH is a hosting service offering all the necessary equipment and industry experience to customers that are interested in mining operations without all the upfront capital expenditures.

To develop its Pod City project, ISW Holdings teamed up with some of the best-known names in the business, including the world's leading producer of cryptocurrency mining hardware and Bit5ive, a leading global cryptocurrency mining firm. ISWH and Bit5ive partnered in May 2020 to build highly efficient yet powerful and modular data centers that ISWH brands as BloqPods. Pod City isn't even complete yet, and ISWH is reporting improving revenue. The company employs a holistic approach to mining where infrastructure and power turn into revenue and cash flow, made possible in part by the  ISO intermodal pods and consideration for where they are placed, including opportunity zones.

Pod City: Phase 1 Nearly Done

It would be fair to say that 2020 wasn't exactly the ideal time to take on a project the scale of Pod City. Only a few months after ISWH and Bit5ive forged a joint venture to construct Pod City, the COVID-19 pandemic surfaced, resulting in businesses closing across the world, effectively choking supply chains as governments tried to stop viral spread.

This was especially challenging for ISWH, which manufactures its BloqPods in America but sources key components globally. Each 40-foot long BloqPod contains 280 Antiminer S19J machines. In aggregate, a BloqPod has capacity of 28,000 TH/s, which translates to 0.1576 Bitcoin per day (BTC). Using $50,000 Bitcoin, each BloqPod has the potential to generate $575.2 million annually. Pod City will have 200 BloqPods.

ISWH and Bit5ive cleared the COVID-related obstacles to develop Pod City at a rapid pace, a testament to the partners and their access to infrastructure and mining equipment. On Dec. 9, 2021, ISWH said that phase 1 of the project is about to go live. Phase 1 is comprised of the infrastructure build-out to deploy 20 megawatts of power to BloqPods. Looking ahead, management sees everything remaining on track to have 200 MW of power and the 56,000 operational during the fourth quarter of 2022.

A Prime Opportunity (Zone That Is)

As mentioned, mining companies are looking to leverage every possibility to get a competitive edge. For ISWH, there is a benefit for using "opportunity zones," distressed, low-income areas in the United States, for which the federal government offers incentives via tax benefits for investment to develop the area to spark economic growth and create new jobs. On the topic of Pod City, Larry Sossamon, president of project contractor Sossamon Construction Co, commented that the project will "create many new jobs and new opportunities in the area."

Relationships with governments is quite important to ISWH in the grand scheme of things. A steward to economic growth, the design of the BloqPods overcome some primary barriers to entry into the cryptocurrency mining business, namely equipment, storage and, importantly, energy. Part of squaring the energy circle is undergirded by partnerships with municipalities that allow access to low energy rates for mining operations.

Exceeding Revenue Expectations

As the company prepares for the first mining activity at Pod City, ISWH is generating revenue from its other operations. During the third quarter, revenue rose 2,435% year-over-year to $1.075 million, including deferred revenues. It's worth noting that those quarter results don't include a full three months of the 550 new miners that ISWH acquired from Minerset in August, 150 of which came from IWSH crossing stock performance milestones. Adding the new machines providing a boost to the company's total assets, which came in a $9.56 million at the end fo the third quarter, a stark increase of 5,263% compared to the year earlier quarter. ISWH also cleaned up its book, shaving total liabilities to 73% and total derivative liabilities by 98% to less than $340,000.

Currently, ISWH is running 560 miners (Bitmain Antminer S17s, BitMain S19 95TH/s and Canaan Avalons) that are housed in Bit5ive POD5 units (a BloqPod under the Bit5ive brand). The operations are located in Pennsylvania and managed by Bit5ive. Capacity from this small-scale site is $6 million for ISWH, a nice supply of capital that helps with dilution as Pod City is developed.

Regarding the subject of volatility, that is taken out of the equation at Pod City. ISWH will earn revenue strictly from hosting service fees, which aren't contingent upon Bitcoin prices. Once Pod City is completed next year and running at full capacity, ISWH management forecasts revenues in excess of $10 million per month. Moreover, the company will be stable with the revenue shored up as recurring under long-term service agreements.

A Bevy of Strategies

Investors are fortunate that there are many ways to gain exposure to cryptocurrency. Some people don't realize that it only takes a couple dollars to take a position because cryptos such as Bitcoin can be bought in tiny fractions of a coin. Over the years, access has opened up as well, with many common financial services offering its clients to invest in crypto. Then there are miners, technology companies, exchange traded funds and more to choose from depending on one's risk tolerance.

Bakkt Holdings Inc. Class A (NYSE: BKKT), a trusted digital-asset platform that enables consumers to buy, sell, send and spend a range of digital assets, will soon be offering users and partners the ability to buy, sell, and hold ether (ETH), which is the cryptocurrency of the Ethereum network. Users can also send Ethereum to family and friends directly through the Bakkt App. With the addition of Ethereum to its existing capabilities with Bitcoin, Bakkt will offer users the ability to access two cryptocurrencies representing more than one-half of the total market value of all cryptocurrencies.

HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) reported record second-quarter numbers, and then followed those up two months later with record production figures for November 2021. The company reported that it currently has 218 BTC Produced, along with $13.2 million Bitcoin mining revenue and 1.31 ExaHash of Bitcoin mining capacity. In addition, the company reported 2,334 ETH produced with $10.4 million Ethereum mining revenue and 4.36 TeraHash of Ethereum mining capacity. Total revenue for the company was $23.6 million.

ProShares Bitcoin Strategy ETF (NYSE ARCA: BITO) has been at the forefront of the ETF revolution since 2006. ProShares now offers one of the largest lineups of ETFs, with more than $69 billion in assets. The company is the leader in strategies such as dividend growth, interest rate hedged bond and geared (leveraged and inverse) ETF investing. ProShares continues to innovate with products that provide strategic and tactical opportunities for investors to manage risk and enhance returns.

MicroStrategy Inc. (NASDAQ: MSTR), the largest independent publicly traded business intelligence company, with the leading enterprise analytics platform, announced earlier this year that it had purchased an additional approximately 13,005 Bitcoins for approximately $489 million in cash at an average price of approximately $37,617 per Bitcoin, inclusive of fees and expenses. That purchase means that MicroStrategy holds an aggregate of approximately 105,085 Bitcoins.

The days of $1,000 Bitcoin are long gone, replaced by a new, steadily climbing asset class that should do well in an inflationary environment like the United States seems to be charting. Certainly there will be more volatility, but at today's prices, there is plenty of room for companies to become profitable, especially those that optimize operations to control expenses. These are the type of companies that thrive in a volatile market climate, always looking for ways to capitalize when the markets make their downward swings.

For more information about ISW Holdings Inc., please visit ISW Holdings Inc.

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