A Curious Case, Indeed: 🤔
- Galaxy Digital, once entangled in the murky depths of Bitcoin mining, has, by some stroke of fate (or perhaps the machinations of mischievous spirits 👻), stumbled upon a goldmine in AI data centers. Imagine that!
- Analysts, those soothsayers of the financial world, whisper that AI data centers offer the stability of a well-fed bureaucrat, a stark contrast to the frenetic dance of Bitcoin.
- The shift, a veritable exodus from the digital pickaxes to the silicon abacus, reflects a desperate scramble for relevance among the crypto-miners.
When the esteemed Mike Novogratz, CEO of Galaxy Digital (GLXY), acquired Argos’ Helios data center in the bleak winter of ’22, post-FTX debacle, it was perceived as a charitable act, a lifeline tossed to a drowning Bitcoin miner. Little did they know, they were holding the key to a rather lucrative Pandora’s Box. 🗝️
— Rittenhouse Research (@RHouseResearch) May 15, 2025
These analysts, with their charts and graphs that would make even the devil dizzy, argue that AI data centers are a far more rewarding venture than BTC mining. Stable, long-term cash flows, they proclaim, with minimal ongoing expenses! A veritable paradise compared to the turbulent, capital-guzzling world of Bitcoin mining. 💸
BTC mining revenues, like a deflating soufflé, diminish by approximately 50% every four years, thanks to those infernal halving events. The miner’s gamble is essentially a long-term bet on BTC’s price and the perpetual advancement of chip technology. For an investor, it’s a veritable Russian roulette of variables! 🎰
In contrast, AI data centers, like Galaxy’s Helios facility, rake in consistent, high-margin revenue through long-term leases to hyperscaler tenants (those behemoths of cloud computing). No need for constant upgrades to mining equipment, just a steady stream of income. A veritable goldmine without the back-breaking labor! ⛏️
“Galaxy stumbled upon Helios by virtue of good luck,” Rittenhouse declared in their note. While rivals like Riot Platforms and Cipher Mining attempt to “rewrite history,” claiming their vision was always broader than BTC mining (a claim as believable as a politician’s promise!), analysts scoff. “In reality, these miners had zero intentions to do anything besides mine BTC until ChatGPT was launched.” 😂
A Broader Industry Shift? 🤔
Galaxy’s metamorphosis mirrors a wider trend as BTC miners desperately attempt to transform into AI and cloud computing gurus. The desperation is almost palpable! 😰
Yet, analysts emphasize Galaxy’s significant advantage, stemming from its superior balance sheet ($1.8 billion of net cash and investments), successful execution record, and credibility established through the CoreWeave lease. A veritable trifecta of advantages!
While some have fretted over CoreWeave’s creditworthiness, causing Galaxy’s shares to trade at a discount (the market, ever the fickle mistress!), Rittenhouse analysts dismiss these fears as overblown. CoreWeave’s revenue stability, they argue, is rock solid, backed by long-term contracts and strong institutional support. 💎
The analysts further assert that CoreWeave’s debt is carefully structured through delayed draw term loans, specifically tied to infrastructure linked to secured customer agreements. A safety net against default, if you will. 🛡️
Rittenhouse also points out that Galaxy has gone all-in on AI, severing all ties with the treacherous world of mining.
“Galaxy has completely exited all bitcoin mining activities to focus solely on its AI data center ambitions, which sends a positive signal to potential hyperscaler tenants,” analysts proclaimed. A clean break, like a surgeon’s scalpel! 🔪
As Rittenhouse writes, Cipher Mining’s CEO Tyler Page recently acknowledged the uphill battle miners face when approaching major AI customers.
“It’s not lost on us that if we’re talking to a counterparty with a $1 trillion market cap… One drawback for bitcoin miners is that major counterparties say, ‘wow, that’s a big obligation for you guys to backstop for such an important investment for us,’” Page lamented on the company’s Q1 2025 earnings call. A harsh reality check, indeed!
Galaxy, however, is free from such concerns. With the Helios deal in place and Novogratz’s company completely divorced from mining, Galaxy’s accidental pivot might just be the most brilliant maneuver in the crypto theater in years – if, of course, Rittenhouse’s thesis proves to be more than just wishful thinking. 🤞
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2025-05-19 10:25