BitFuFu Expands Operations with New Mining Facility in Ethiopia

BitFuFu, a Bitcoin mining company listed on Nasdaq, announced on October 22 that it plans to acquire a majority stake in an 80-megawatt (MW) cryptocurrency mining facility in Ethiopia. This move represents a strategic pivot for the Wall Street-based miner, which is seeking to lower its operational costs by tapping into cheaper energy sources in East Africa.

Over the past year, BitFuFu has experienced a staggering 170% increase in operational costs, leading to a 75% decline in net profit. The Ethiopian facility, with energy costs averaging below $0.04 per kilowatt-hour, is expected to help mitigate these financial challenges.

Enhancing Mining Capacity with New Facility

The acquisition is projected to significantly boost BitFuFu's mining capacity. When equipped with Bitmain’s latest S21-series miners, the facility is expected to contribute an additional 4.6 exahashes per second (EH/s) to the company's total mining output. Following this acquisition, BitFuFu's overall hosting capacity will exceed 600 MW, increasing from 522 MW, with approximately 13% now directly owned and operated by the company. This marks a notable shift from its previous strategy, which relied heavily on third-party facilities.

While the financial details of the acquisition remain undisclosed, it is a significant milestone for BitFuFu, which has primarily operated through third-party hosted facilities in locations such as the U.S., Portugal, and Indonesia. The company aims to enhance its operational capacity and technological efficiency at the new Ethiopian site and is considering further acquisitions to strengthen its global presence.

Industry Challenges and Future Prospects

BitFuFu’s expansion comes at a time when the cryptocurrency mining industry faces numerous challenges. In Q2 2024, the company reported revenues of $129 million, marking a 70% increase year-over-year. However, net profits plummeted from $5.1 million to $1.3 million due to rising mining costs.

The cryptocurrency mining sector is currently grappling with high mining difficulty levels and declining revenues. Earnings for Bitcoin miners have dropped to $827.56 million, the lowest since September 2023. In response, many mining companies, including BitFuFu, are exploring diversification into artificial intelligence and high-performance computing as potential alternative revenue streams. Experts believe these pivots could unlock significant value in the coming years.

Despite the increasing difficulty in Bitcoin mining, companies have not significantly increased their Bitcoin sales. On October 20, miners sent only 2,916 BTC to centralized exchanges, marking one of the lowest selling days in the past month. Following the Bitcoin halving event in May, some consolidation has occurred, with the network's hash rate declining to a two-month low of 575 EH/s. This drop has been attributed to miners shutting down unprofitable rigs amid rising costs and diminishing rewards. Nonetheless, many miners continue to hold onto their Bitcoin assets.