Bit Digital: The Bitcoin Exit Is Real

Summary Bit Digital is pivoting away from Bitcoin mining toward high-margin ETH staking, and HPC services, transforming its revenue mix and growth strategy. The $150M equity raise will fund ETH purchases for treasury and WhiteFiber HPC expansion, but introduces dilution and ETH concentration risk. WhiteFiber’s potential IPO could unlock value for BTBT shareholders, either through direct share distribution or a sum-of-the-parts re-rating. At 2x P/S and ~$2/share, with management insider buying and a clear strategic shift, BTBT offers an attractive risk/reward and is rated Buy. Before now, Bit Digital Inc. ( BTBT ) hadn’t been on the list of my favorite Bitcoin ( BTC-USD ) miners these past years for a concrete reason: they relied heavily on third-party hosting partners. Their aggressive outsourcing was creating operational hiccups almost every other quarter. This third-party infrastructure reliance seemed efficient on the surface and offered an asset-light growth model (or so it seemed), but in reality, it meant vulnerability to counterparty risks and external disruptions. This vulnerability has held true in the documented history of Bit Digital’s operations, which has included forced relocations , hosting partner shutdowns , and even infrastructure fires that knocked significant capacity offline. All the aforementioned incidents are directly linked to reliance on external hosting providers. That said, Bit Digital now seems determined to put those bad days behind and is slowly exiting the messiness that came with Bitcoin mining – as the Q1 financials sales composition shows. In this piece, I’ll take a look at the Q1 highlights released in May, and see what’s really changed under the hood, and what’s next following the $150 million offering priced at $2 that sent the stock spiraling last week, now finding a floor around the offering price. Mining Takes a Backseat at Bit Digital Q1 results showed a 17% YoY decline in total revenue, but the real story is the shrinking sales Bit Digital generated from digital assets mining, which declined by ~64% YoY. This is the main indication of the company’s gradual pivot away from Bitcoin mining. The decline in digital asset mining revenue wasn’t a one-off in Q1; it has been a trend for Bit Digital since last year. Q1 FY25 revenue (10 Q) Since Q2 FY24, the numbers show that the company is steadily backing away from Bitcoin mining. Digital asset mining revenue dropped from $16.1 million in Q2 last year to $10.1 million in Q3, then around $13 million in Q4, before crashing to just $7.8 million in Q1 this year. The decline in the digital asset mining sales numbers wasn’t as a result of an absolute decline in Bit Digital’s total revenue numbers. As the trend reveals, the digital asset mining segment’s contribution as a percentage of total revenue fell from 55% in Q2 last year to 44% in Q3, then down another 400 bps to 40% in Q4 last year, and finally down to 31% in Q1 this year. The trend shows it is a clear, measured retreat from digital asset mining. Mining is no longer at the center of Bit Digital’s growth strategy; scalable lines like ETH staking, GPU cloud, and colocation services have taken over the revenue mix. Author Bit Digital’s revenue mix from the company’s other segments paints a vivid picture of this evolving strategy. Looking at the comparable periods from the Q1 results and last year’s Q1, we see a remarkable surge in these other segments. ETH staking revenue (a new yield-generating income stream for the company, which we’ll get to in details down the line) witnessed an impressive 72% climb from $325k in Q1 last year to $561k in Q1 this year; ETH staking is in particular an interesting business line because of its low cost of revenue, resulting in a higher gross margin. Cloud Services revenue grew by 83.92% from $8.01 million in Q1 last year to $14.8 million in Q1 this year. Furthermore, Colocation Services revenue, a relatively nascent but rapidly growing segment for the company following our acquisition of Enovum in late 2024, grew from $0 in Q1 2024 to $1.6 million in Q1 2025. Q1 FY25 balance sheet (10 Q) The balance sheet shows significant cash depletion in Q1, with cash and cash equivalents decreasing by $36.7 million and digital assets decreased by $82.3 million sequentially, making total current assets decrease by $108 million in Q1. Investors who have been following Bit Digital are aware of the capital shift the company began as it scaled the HPC business line under the new brand WhiteFiber in Q1. While current assets decreased in Q1, non-current assets increased, mainly in property, plant and equipment, pointing to investments related to HPC expansion already underway, likely in GPU hardware or other preps for WhiteFiber. I anticipate a similar trend for the Q2 balance sheet, with an expected decrease in liquid assets because of the $45 million spent early this month, among other investments, for the recently acquired 1 million square foot North Carolina site for WhiteFiber. Though Bit Digital plans to refinance the NC property by taking out a mortgage, there is still near-term liquidity drain to be anticipated. Q1 FY25 cashflow (10 Q) Though operations generated cash flow of $17.4 million in Q1, the heavy investing activities of $65 million (mostly tied to the CapEx and early infrastructure ramp-up for WhiteFiber mentioned earlier) and $9.4 million in financing activities meant that there was a net cash burn of $38.2 million. With $58.6 million in cash and cash equivalents (excluding restricted cash) as of Q1 end, Bit Digital’s cash runway faces the potential to be further strained in Q2 if we consider net outflows in the $35–45 million range continuing along with the $45 million already committed to WhiteFiber’s North Carolina site acquisition in Q2. Equity is Bit Digital’s Lifeline Debt has remained manageable at Bit Digital with a total debt of $14 million and a debt-to-equity ratio (debt divided by total shareholders’ equity) of 0.3 currently. Shareholders’ equity was $147.4 million as of Q1 end. A further look into the leverage ratio by considering total liabilities of $67.8 million, and not just interest-bearing debt of $14 million, we still get a debt-to-equity of 0.12. Both debt-to-equity calculations based on interest-bearing debt and total liabilities as numerators show that Bit Digital has enough balance sheet health. The weight of debt in the company’s capital structure is almost negligible. However, with the current expansion and the ongoing cash burn I highlighted in the preceding section of this article, it is no surprise that Bit Digital currently relies on a mix of equity-driven funding options. Hence, the 75 million shares offering priced at $2 for gross proceeds of $150 million was announced last week. There is also an active $500 million ATM , of which $48 million was raised post-Q1 (the $48 million ATM raise was disclosed in the Q1 earnings call ). Bit Digital has said the $150 million equity offering priced at $2 per share will be mostly used for the purchase of Ethereum ( ETH-USD ) as a corporate treasury asset. Previously in this piece, I mentioned ETH staking as an interesting stream of revenue because of its low cost of revenue and high gross margin compared to the other revenue streams. Doubling down on purchasing more ETH for treasury assets with the planned $150 million raise is a bold bet and gives potential yield generation from staking, but investors should be aware that this also creates a concentration risk with ETH, and BTBT will potentially be more closely tied to ETH price volatility. If the allocation to ETH ends up accounting for a higher share of revenue contribution, a good quarter in other operating segments could be distorted by a poor price performance from ETH. Data by YCharts Bit Digital isn’t the most expensive digital asset miner at the moment, trading at 2x P/Sales and around 1.0 to book value. Among mining peers compared in the preceding chart, BTBT trades at the lowest multiple to sales and book value. The clear pivot to HPC has been followed by clear steps like the formal structuring of the business into WhiteFiber and the 1 million square foot site acquisition, which shows an impressive level of strategic commitment and capital deployment, and are the attractions here, in my view. Yes, there are ongoing dilution risks moving forward, but for a good portion of this capital cycle, the equity financings aren’t emergency raises yet. They are to fund the clear ETH treasury strategy and build out WhiteFiber into a full-scale HPC infrastructure asset. Bit Digital’s WhiteFiber carve-out got more interesting when an 8-K filing earlier this month hinted at the potential for WhiteFiber to become an independent public company through an IPO, and that process is well underway as Bit Digital submitted a confidential S-1 that included a draft registration statement with the SEC last week. There are potential outcomes that could play out that will potentially benefit existing BTBT shareholders if the IPO happens. First, BTBT shareholders could receive pro-rata shares in WhiteFiber post-IPO, giving them direct exposure to a potential fresh high-growth valuation. Then, even if WhiteFiber shares aren’t distributed to BTBT shareholders but Bit Digital retains majority ownership of WhiteFiber, the separate listing would support a sum-of-the-parts re-rating for BTBT. Either path would allow BTBT investors to see the value of WhiteFiber more clearly reflected in BTBT’s market valuation. And I believe Bit Digital’s management will not want to put existing shareholders underwater with their decisions. The insider share accumulation has also increased lately at Bit Digital. The CEO has raised his holdings to over 2.1 million shares after purchasing 750,000 shares of the company’s stock at $2.00 per share, disclosed in a Form 4 filing last week . This, I believe, strengthens alignment between management’s interests and those of shareholders. At 2x P/S and ~$2 per share, down 31% YTD, I believe BTBT is worth a Buy. The company’s pivot to both HPC and ETH treasury is transformational. Investors should not forget the potential for ongoing dilution and the growing concentration risk from ETH exposure. But at these levels, the risk/reward looks increasingly attractive. Trading at a modest 2x P/S with solid execution while undergoing a transforming business model, the market may still be pricing in the older, miner-only version of Bit Digital. This leaves room for a potential re-rating.

Source: Seeking Alpha