CleanSpark Doubles Down As Bitcoin Mining Reaches Breaking Point

CleanSpark purchased 7 new mining facilities in East Tennessee, consolidating operations in a new region. These investments come at a difficult time for Bitcoin miners.

The company hopes to close some facilities before the end of the month to carry out upgrades for a long-term plan.

Tennessee’s Mining Hub

On September 11, Bitcoin miner CleanSpark announced that it would acquire seven new mining facilities in East Tennessee. CleanSpark is a low-carbon mining firm that primarily uses renewable electricity to power its operations, making East Tennessee a particularly attractive destination.

According to court documents related to CleanSpark’s recent purchases, all seven facilities are preexisting mining operations that changed ownership. In other words, CleanSpark is consolidating the area’s mining infrastructure, not expanding it as a new hub.

These purchases amounted to a sum of $27.5 million, and CleanSpark will close these sites before the end of the month. After this closing, CleanSpark will conduct a series of upgrades, using S21 pro miners to increase “the company’s current hashrate by over 22 percent,” according to the press release.

“With this additional 5 EH/s expected to begin hashing over the coming weeks, we now expect to achieve 37 EH/s before the end of 2024. As we’ve previously discussed, our timing of the market on mining server purchases intentionally locked in low prices so that we could take advantage of opportunities like this and immediately fill acquired data center space,” Zach Bradford, CleanSpark’s CEO, said.

Bitcoin miners have moved to East Tennessee in the last two years for various reasons. The region is attractive to new investors due to cheap land and friendly mining regulations. However, it is the vast hydroelectric infrastructure that makes large-scale Bitcoin mining possible.

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Since the 1930s, the Tennessee Valley Authority (TVA) has maintained a formidable hydroelectric power grid in the region. Therefore, the area has comparatively few coal-based power plants. This makes East Tennessee particularly attractive to a firm like CleanSpark, which prides itself on low emissions.

As Bradford himself put it, “Tennessee has a similar political and energy environment to Georgia, where we’ve deployed nearly $1 billion of capital and operate nearly 500 MW.” The investment, in other words, could be a first step. If CleanSpark’s new facilities are a success, it may lead to further intensification of crypto mining infrastructure in the region.

Bitcoin Mining Difficulty

However, several obstacles exist between CleanSpark and a long-term infrastructure construction project. As Bradford mentioned, this purchase was timed to close a deal when the asking price was the lowest.

New data suggests that mining difficulty is at an all-time high, which is concerning next to Bitcoin’s price drops. When mining difficulty is high, it usually means there are more miners competing, which increases the energy and resources needed to mine new blocks. If the price of Bitcoin drops during this time, it can become less profitable for miners.

This creates concern because miners might struggle to cover operational costs, especially if they rely heavily on Bitcoin’s value for their revenue. In some cases, sustained high difficulty and low Bitcoin prices can lead to miners shutting down operations, which aligns with what investment bank Jefferies said in a research report.

“September is shaping up to be another difficult month as BTC remains below $60K and the network hashrate continues to climb,” analysts at Jefferies wrote.

These broader economic downturns coincide with a difficult moment for CleanSpark itself. The company’s stock valuation has been on a steady decline and may be crossing critical thresholds. Specifically, CleanSpark’s short-term moving average has nearly descended past its long-term moving average, a so-called “death cross” suggesting a long-term decline.

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These price moves may shake investor confidence in the context of increasing hardship for the entire industry.