Canaan Inc., a company named after the biblical Promised Land and listed on the stock market as CAN.US, is ramping up its bitcoin mining operations. According to the Denver-based company’s most recent monthly report, the company minted a total of 90 bitcoins during the month of March. This is a 10% jump from February and the largest output since December 2023. Uncertainty looms large as the crypto market enters a new phase of uncertainty. At least three interconnected factors are accelerating this shift, one of which is the recent U.S. protectionist policies.
In order to bait its mining aspirations, Canaan has raised massive rounds of funding. The money came in another $100 million round, in large part through the issuance of new convertible preferred shares. Canaan secured a $21 million term loan, placing its bitcoin assets as collateral. By the end of March, Canaan had mined and owned 1,408 bitcoins. This stash is worth about $120 million today, if you count the current market prices.
Though there’s been a recent downturn, bitcoin prices are still high as compared to one year ago. Like many companies in the crypto market, Canaan is facing significant headwinds, leaving the future of the still-developing trading landscape uncertain. The company has massively expanded its mining operations. This boom occurs against a backdrop of uncertainty in the crypto market due to recent U.S. protectionist measures.
Canaan’s stock performance in the public markets would seem to mirror some of these greater challenges. Investors need to understand that over the last year its shares have dropped 37%, leading to a P/S ratio of just 0.8. This valuation is 65% less than that of Ebang. Even Ebang, a much smaller competitor in the 2021 crypto mining machine manufacturing space, has an admirable P/S ratio of 6.
Even Canaan’s CEO, Zhang Nangeng, admitted the recent challenges in the crypto market.
This has negatively affected market sentiment, future expectations and especially financing activities across the markets. - Zhang Nangeng, Canaan CEO
The company has been in a fiscal crisis, failing to generate a profit for at least two years. The company attributes these losses to its increased strategic investments. They’re building on their core, proprietary mining machine business while working to stand up new mining operations.
To Canaan’s credit, it has worked to tighten the belt, but it’s still projecting a major net loss this year. That projection may go even higher, potentially as much as $1.1 billion. That’s up from the $269 million deficit projected for 2024.
Canaan’s pivot towards bitcoin mining represents the company’s latest attempt as it tries to stake a claim in the burgeoning cryptocurrency industry. By increasing its mining capacity and leveraging its bitcoin holdings, Canaan aims to navigate the current market uncertainties and capitalize on future opportunities.
