CleanSpark’s move to a self-funding model, selling the Bitcoin they mined each month to pay expenses, seems simple in concept. On the surface, it’s framed as getting to “escape velocity” – victory dance worthy jump up and down money where you finally make it open up. But is it really that easy, or is this a dangerous game of high-stakes chicken with the Bitcoin market?

Let's be real. We’re not just talking about accessing the revenue generated from selling a rather famously volatile asset—cryptocurrency—to pay the electric bill. In the end, bitcoin is nothing short of miraculous resiliency. It’s still subject to the whims of regulatory shifts, macroeconomic fears and the unpredictable fancies of crypto whales. A new $200 million USD denominated credit facility from Coinbase Prime secured by Bitcoin buys them breathing space, no doubt. It's still Bitcoin-backed debt.

This isn't necessarily about CleanSpark specifically. Major mining stocks have tanked more than 40% year-to-date. Now, with the halving slashing rewards, miners’ scramble to adapt. The euphoria of 2021 is long gone. The CoinShares Crypto Miners ETF (WGMI) CoinShares Crypto Miners ETF Narrative WGMI paints a simple picture. The real question is: are they solving a problem or postponing the inevitable?

The prospect of another Bitcoin halving in April 2024 was an additional gut punch. All of a sudden you’re now having to work double the effort just to mine the same number of Bitcoin. Then add into the mix the possibility of Trump’s tariffs on imported mining machinery. It’s a Triple Whammy brewing for US miners.

CleanSpark claims this decision differentiates them from competitors who are diluting equity or taking on more leverage. What happens when Bitcoin dips again? Then what happens when the next black swan event rattles the market? Or will they be driven to sell even more Bitcoin at fire sale prices, making matters worse in a death spiral? It's a dangerous game. That sounds a lot less like genius to me and a lot more like a deliberate, though fraught, strategy for survival.

Consider Bitdeer. As CleanSpark sells their Bitcoin, Bitdeer moves to manufacture mining hardware in the USThis is a drastically different approach altogether. It’s not just about controlling the supply chain, reducing dependence on foreign sources of supply and other benefits — it’s about creating a new revenue stream. It’s more than just reacting to volatility—it’s about building resilience.

From my vantage point across the pond in the UK, there are striking similarities to the way energy companies globally are trying to navigate the green transition. Others are doubling down on their outdated infrastructure, crossing their fingers for a miraculous turnaround. While some companies double down on fossil fuels, others are focusing more on renewable energy sources, diversifying their portfolios and ultimately creating a more sustainable future. CleanSpark’s strategy seems like the latter – at best, a temporary band-aid rather than a robust solution.

Here's the truly unsettling thought. Should CleanSpark’s model be successful, will other miners try to do the same thing? What happens when a significant portion of the mining industry comes to rely on Bitcoin sales to cover their operating costs? What will that mean for the security of the Bitcoin network? Could it be setting into motion a self-fulfilling prophecy of price instability that would crash the very asset they’re attempting to mine? It might create a cascade effect of additional selling pressure, pushing the price down further and further.

Today we need to be asking ourselves a more fundamental question. Have we seen a strategic adaptation to new circumstances within Bitcoin mining or a long-delayed, short-sighted decision-making fueled death spiral? CleanSpark’s pivot is a high-risk, high-reward bet, for sure. It is yet to be seen whether that’s a genius move or a Hail Mary. To be honest, the odds seem pretty much impossible.

From my perspective in the UK, I see parallels with how energy companies are approaching the green transition. Some are doubling down on existing infrastructure, hoping for a miraculous turnaround. Others are investing in renewable energy sources, diversifying their portfolios and building a more sustainable future. CleanSpark's approach feels more like the former – a short-term fix rather than a long-term solution.

The Bitcoin Network's Fate Hangs?

Here's the truly unsettling thought. If CleanSpark's model proves successful, will other miners follow suit? If a significant portion of the mining industry starts relying on Bitcoin sales to fund operations, what impact will that have on the Bitcoin network itself? Could it create a self-fulfilling prophecy of price instability, undermining the very asset they're trying to mine? It could create a cascade effect of selling pressure, driving the price down further and further.

We need to ask ourselves, are we witnessing a strategic evolution of Bitcoin mining, or a slow-motion collapse driven by short-sighted decisions? CleanSpark's pivot is a bold move, no doubt. But whether it's a stroke of genius or a desperate gamble remains to be seen. And frankly, the odds feel stacked against them.

It's time to prepare for potential fallout.