This Bitcoin Mining Stock Is Still 70% Below Its Peak but Now Makes Up 34% of a Portfolio

Aurelius Capital Management opened a new 6.7 million-share position in Bitfarms (NASDAQ:BITF) worth $19 million as of Sept. 30, representing 34.4% of the fund’s 13F-reportable AUM and making BITF its largest U.S. equity holding. Bitfarms reported Q3 continuing revenue of $69 million (up 156% YoY) and adjusted EBITDA of $20 million (28% of revenue); TTM revenue is $276.4 million with a TTM net loss of $128.2 million, a market cap of about $1.5 billion, and total liquidity roughly $814 million following a $588 million convertible note offering. Management is reallocating capital toward higher-value infrastructure including HPC/AI workload conversions and North American GPU-support projects, and the concentrated fund stake signals institutional conviction in scale, power access and balance-sheet flexibility as drivers of upside.

Analysis

Market structure: Aurelius piling 34% of its 13F AUM into BITF signals concentrated capital chasing vertically integrated miners and digital-infrastructure optionality. Winners: Bitfarms (BITF) and regional power providers/hosters that can monetize stranded/low-cost energy; losers: undercapitalized ASIC-only miners and high-cost operators facing tighter power markets and bidding for capacity. Expect greater pricing power for firms with >$500m liquidity and long-term power contracts; electricity demand from mining-to-AI conversions can push localized wholesale power prices +10–30% in constrained grids over 12–24 months.

Risk assessment: Tail risks include abrupt regulatory constraints (US/Canada moratoria or punitive tariffs) and a >50% Bitcoin drawdown that would stress mark-to-market liquidity and trigger convertible-note dilution. Immediate (days) — 13F-driven flow lift; short-term (3–12 months) — execution on GPU/AI conversions and permitting; long-term (1–3 years) — success depends on capturing non-BTC revenue >20% of total. Hidden dependency: BITF’s $588m convertible structure and bitcoin holdings create nonlinear dilution and liquidity sensitivity to BTC price swings.

Trade implications: Direct: establish a tactical 1–2% portfolio long in BITF (buy areas $1.8–2.6), stop-loss 30%, take-profit tranche at $5 (≈+100%) within 12–24 months if AI pivot signs manifest. Pair: long BITF vs short MARA (or HUT) sized 1:1 notional to isolate infrastructure execution vs pure mining leverage. Options: buy BITF Jan 2027 $5 LEAPS (debit spread if IV rich) or 3–6 month call spreads ahead of permitting/capex announcements; sell covered calls on partial positions to monetize time decay.

Contrarian angles: The market is underpricing execution risk converting ASIC sites to GPU/AI workloads — power density, cooling, and contract cadence differ materially and can blow out capex by 30–50%. Aurelius’ concentration can be a liquidity squeeze if they reduce; the rally may be overdone given potential dilution from convertibles and BTC volatility. Historical parallel: 2018 miner recapitalizations that later required restructurings — position sizing and dilution thresholds (e.g., conversion >10% of float) should be hard stop triggers.

Key Decisions for Investors

• Consider establishing a 1–2% portfolio long in BITF on pullbacks to $1.80–$2.60; set a hard stop at -30% and scale out half the position at $5.00 within 12–24 months if AI/hosting revenue >20% of total.
• Implement a relative-value pair: long BITF vs short MARA (equal notional) to trade infrastructure execution vs pure mining exposure; reweight if BITF reports >$100m of non-BTC hosting contracts or MARA margin compression >300bps.
• Buy BITF Jan 2027 $5 LEAPS (or a 2x debit-call spread to cap premium) sized to equal 0.5–1% portfolio risk; if implied vol >70%, prefer a 2-strike call spread to reduce premium.
• Reduce exposure to small-cap, high-cost miners (e.g., HUT, other sub-$1b miners) by 50% if BTC falls below $30,000 or if regional power prices rise >20% YoY; redeploy into renewable power names (e.g., NEE) benefiting from long‑term demand.
• Monitor BITF convertible terms and total liquidity weekly for 60 days; if convertible conversion would dilute >10% of float or liquidity falls below $400m, cut exposure to zero.