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Shares Or Tokenized Assets? What Is The Best Way To Accumulate Bitcoin?

July 29, 2022
min. read

Home mining is a thing of the past. It is expensive, difficult and very risky, because it requires a lot of money, but offers no guarantees. What are we left with? Similarly to the traditional market, we are left to search for large mining companies to include their shares in our portfolio. However, is this method good enough?

There is an interesting example. The Celsius Network crypto landing platform and some of its subsidiaries notoriously filed a bankruptcy petition in a New York court on July 14, 2022 due to a significant decline of the cryptocurrency market. Recall that on June 13, the platform suspended the withdrawal of funds, exchange and transfers between accounts. At that time, the company explained this by "extreme market conditions", but analysts suggested that the real reason  was a "liquidity crisis".

At the same time, Celsius presented a reorganization plan, which allowed it to compensate for losses, largely contingent on the future profit of its mining subsidiary Celsius Mining. Back in June 2021, Celsius announced an investment of more than $200 million in Bitcoin mining in North America. And in November of the same year, Celsius Network CEO Alex Mashinsky announced the allocation of an additional $ 300 million for the same purposes. On May 16, 2022, Celsius Mining confidentially submitted a Form S-1 application for an IPO to the U.S. Securities and Exchange Commission (SEC).

Celsius representatives explain that at the disposal of Celsius Mining there are more than 43,000 Bitcoin mining units. Their number is slated to increase to 112,000 approximately in the second quarter of 2023. The company's lead lawyer, Pat Nash, said that Celsius Mining generates approximately 14.2 BTC daily. By the end of 2022, the company expects to produce 10,100 BTC (~$200 million at the rate of $20,000/BTC).

Thus, in times of turbulence in the cryptocurrency market, mining subsidiaries demonstrate the best survival strategies and create a positive cash flow that can bring their related, or even the main business back from the brink of disaster.

However, the following fact is also worth mentioning. Shares of cryptocurrency-related companies, including mining companies, are losing far more value than Bitcoin itself. For example, the shares of Marathon Digital fell from $29.49 to $5.27, i.e. almost 5.6 times, between April and June 2022, during the incessant fall of crypto assets, while Bitcoin went from $47,444 to $17,622, i.e. decreased in value only 2.7-fold.

This suggests that mining companies’ shares do not yet arouse the same confidence among traditional investors as cryptocurrencies or their mining do among crypto enthusiasts. This means that in order for a mining company to become truly attractive to different target audiences, it needs to use more advanced capital-raising tools.

For the crypto industry, this tool is tokenization (i.e., of mining power). Today, buying hashrate can be much more profitable than buying securities of mining companies. Tokenized assets are more understandable for crypto enthusiasts than securities, and do not require registration, documents or reporting. And if the mining power is tokenized, isn't this the shortcut to getting real mining income without entering the classic market? There is another question: is there a better algorithm for accumulating BTC than buying hashrate in order to get maximum profit and financial freedom in favorable market conditions? (We will talk about financial freedom later, but let’s think about this practical question for now).

So, what do you think is more attractive - shares of large mining companies or tokenized hashrate? How to buy Bitcoin in order to minimize the risks under extreme conditions and get the maximum profit when the market returns to intensive growth?

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