However, the Bitcoin blockchain is also now officially scheduled to receive an important upgrade, which could be a more long-term demand driver.
The company is already taking on as much debt as it can to buy more and more bitcoins, as we’ll see in a minute.
First the short-term catalyst for Bitcoin: On June 13, Musk said Tesla would start allowing Bitcoin as a method of payment again on two conditions.
While Bitcoin popped around the time of Musk’s comments, it’s important to note that most people aren’t using Bitcoin to pay for things like they would with fiat currency.
You see, right now Bitcoin is limited with how much volume it can handle, and normal payment volume for an entire economy would be too much.
But developers only propose ideas — miners have to signal support for the proposals by putting a marker on the blocks they process.
Important changes include the ability for speedier transaction processing — basically the data on the blockchain should get smaller, making it speedier and less energy intensive.
The company currently holds over 92,000 bitcoins and on June 14 it issued $500 million more in convertible senior notes to buy even more Bitcoin.
We often discuss how miners are rewarded with 6.25 bitcoins for every block they mine — this is one way companies like Riot Blockchain and CleanSpark make money.
Simply put, there’s a lot of variables in play making it hard to predict what revenue will look like for these companies.
But just because miners are purchasing a lot of equipment right now doesn’t mean investors interested in this space can be indiscriminate in what stocks they buy.
By contrast, Ebang’s revenue fell 83% year over year in 2020 as management noted weak demand for its mining machines — for perspective, that’s not much worse than Canaan’s 69% decline in 2020 revenue.