Welcome to Mining Wednesday, where Blockspace covers the intersection of bitcoin mining, energy, and AI.

Today, we dive into Hut 8’s new venture with Eric and Donald Trump Jr., American Bitcoin, and why Hut 8 is giving its subsidiary virtually all of its self-mining hashrate in exchange for an 80% stake.

Plus, headlines from the last few days, Tweet of the Week and a check in on Chun Wang 👀 

It’s about a 5 minute read.

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Inside American Bitcoin, the Hut 8-Trump venture

This week, Hut 8 raised eyebrows in a deal miners wouldn’t have fathomed in their most feverish dreams just years ago: Hut 8 founded a new subsidiary, American Bitcoin, in partnership with the Trump family.

American Bitcoin is a rebrand of American Data Centers Inc., which includes Eric Trump and Donald Trump Jr. among its list of investors. Eric Trump will serve as American Bitcoin’s chief strategy officer, with Matt Prusak – formerly the CEO of US Bitcoin, which merged with Hut 8 in 2023 – taking the helm as CEO. 

Markets are favoring the move, with Hut 8 up over 14% in today’s morning session to $13.32.

Hut 8 is transferring the majority of its self-mining assets, some 10 EH/s with a 21.2 J/TH efficiency to American Bitcoin and it owns an  80% stake of the new company to American Bitcoin’s 20%. (Note: Hut 8’s February production update indicates it only has 4.6 EH/s online, so the 10 EH/s likely includes initiative and on-order ASICs as well).

Hut 8 will manage sites, operations, and the core business–from HR to compliance–for American Bitcoin, and it will share certain employees with the new company. 

The new business marks the deepest foray for the Trump family, whose patriarch has earned the sobriquet “The Bitcoin President” for his embrace of crypto, into the world of bitcoin yet. Previously, their ventures centered on a vaguely-defined DeFi project, World Liberty Financial, as well as a succession of NFT mints and memecoin launches.

For Hut 8, the play pushes it into a role as an infrastructure and power provider. The venture virtually divests it of its self-mining bitcoin operations, which were already eclipsed by Hut 8’s 7.7 EH/s of hosting services and 9.4 EH/s of managed services as of February.

Observers raised immediate questions about what Hut 8 stands to benefit from the venture. No cash changed hands, so Hut 8 essentially transferred virtually all of its mining fleet to American Bitcoin for an 80% stake in what used to be 100% its own.

Hut 8 CEO Asher Genoot told Blockspace Media he doesn’t view the venture as “we’re taking 80% of 100%” but rather a way to “have two separate companies that have two different groups of shareholders” that want different types of exposure.

“I have investors who are invested in the company and love our bitcoin mining business … and then I have other investors who are investing because of the AI data center opportunity. And so when I go in and say, “I'm gonna go and buy more machines and go and invest in bitcoin,” half of our shareholder base is like, “I love that. Do it.” The other half of the base is like, “Why aren't you investing in AI and data centers? And so we've been thinking about this strategy for a long time,” he said.

The Donald Effect: What the Trump’s bring to the table

Genoot emphasized that Hut 8 is an energy infrastructure company that wants to be “at the intersection of power and technology…to support any new and emerging technology” (currently, that new technology is either AI/HPC and bitcoin mining). Divvying up the company responsibilities will allow Hut 8 to focus on infrastructure, while American Bitcoin scales its bitcoin mining business to a targeted 50 EH/s.

But beyond dividing responsibilities, Genoot said that the alliance with the Trump family brings financial and developmental benefits as well. On the finance front, a partnership with the Trumps could give Hut 8 access to capital that was previously out of reach, and Genoot noted that “obviously they finance large scale projects throughout their company, and so [there’s a] lot of overlap.”

The company he’s referring to, American Data Centers Inc., was formed by Eric Trump, Donald Trump Jr., and other investors as a data center development firm, before it was rebranded to American Bitcoin as part of the Hut 8 agreement. Donald Trump forged the family fortune from a prolific real estate development business, so it’s no surprise that Hut 8 is eying synergies with its data center operations and the family’s collective development and construction acumen.  With this expertise, “the core focus is on American Bitcoin,” Genoot said, adding that it could “support Hut 8 as well.”

Will Hut 8 shareholders reap the benefits of American Bitcoin?

Whether or not the pivot is accretive to Hut 8 shareholders may hinge on how successful American Bitcoin is at fundraising, VanEck’s Head of Digital Asset Research Matthew Sigel observed.

Genoot mentioned on our call that he was working out of Eric Trump’s office on a fundraising blitz. He said the ultimate goal is to spin off American Bitcoin and take it public with Hut 8 still owning its majority stake.

If that happens, the company will obviously report its own financials, but until that point, Hut 8 will consolidate American Bitcoin’s financials in its own reporting. 

Hut 8 emphasized in its press release that the American Bitcoin venture will “generate stable, contracted revenue streams.” Some might say that Hut 8 already had stable revenue streams from its self-mining arm to begin with. But others might say that now, Hut 8 is offloading both the CAPEX and OPEX burden of running a bitcoin mining business on to American Bitcoin while also potentially making a larger spread on its allocated energy when mining economics are tough – or at the very least, ensuring predictable revenue.

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