Greenidge Generation’s Bitcoin Bet Is Extremely Speculative

On paper, the merger between cryptocurrency miner Greenidge Generation Holdings (NASDAQ:GREE) and customer and technical support solutions provider (NASDAQ:SPRT) seems an interesting concept. Both markets are viable, which theoretically expands the relevance of GREE stock. At the same time, the two businesses couldn’t be any more different, which poses serious challenges.

a crypto mining rig
Source: Mark Agnor /

Against an optimistic framework, I understand and appreciate the enthusiasm regarding GREE stock. Billed as the world’s first publicly traded and vertically integrated Bitcoin (CCC:BTC-USD) mining company, Greenidge Generation plays right into the burgeoning (and now-mainstream) sentiment for cryptocurrencies. These days, if you have any loose semblance to blockchain-based assets, your stock will rise — literally in this case.

Better yet, GREE stock benefits from an ace up the underlying company’s sleeve. Contrary to early crypto-mining operations, Greenidge features a 100% carbon-neutral Bitcoin mining business model, according to CEO Jeff Kirt. That, right there, could swing the narrative in favor of Greenidge over the long run.

Per a CNBC report in July, Bitcoin mining isn’t nearly as environmentally taxing as it once was, in large part thanks to China’s crackdown on crypto mining. Per the article, “China shutting its doors to crypto mining has set off a massive migration. Miners are now heading to the cheapest sources of energy on the planet, which more often than not are renewable.”

The aforementioned circumstance has been a boon for U.S.-based crypto-mining operators, with domestic production accounting for nearly 17% of all global bitcoin miners. Naturally, this is a strong fundamental driver for GREE stock.

However, not everything about Greenidge’s merger is positive. Indeed, the market considers it a cataclysmic negative, with shares down more than 45.5% against the Aug. 30 close at time of writing.

GREE Stock Navigating Ambiguous Jurisdictional Waters

But with Greenidge forwarding environmentally friendly Bitcoin production, shouldn’t this represent an upside catalyst for GREE stock? Unfortunately, I don’t think the circumstance is that simple.

Earlier, I mentioned that the merger between SPRT and GREE involved two businesses that couldn’t be further apart. By that, I don’t necessarily mean that the operations are disparate (though I admittedly have trouble understanding how software solutions have much to do with crypto mining). Rather, it’s that one company drives value through distinguished services/products while the other is a commoditized enterprise.

Because when we’re dealing with a proof-of-work protocol like Bitcoin, commoditization is the name of the game. Based on Bitcoin’s algorithms, he who has the most mining rigs wins — or at least has the highest probability to win. So what does that mean for GREE stock? Pure commoditization. As CNBC pointed out, the crypto-mining segment is seeing a race to the cheapest source of energy.

Currently, the U.S. offers a viable balance between jurisdictional stability and ample infrastructure. But the rub is that this dynamic is not guaranteed to sustain itself indefinitely. Yes, the U.S. is the number two crypto miner thanks to an influx of market share but that geopolitical advantage can always change.

For instance, following the Chinese crackdown, many mining operators shifted to Kazakhstan — yes, Kazakhstan. It’s now just behind the U.S. in terms of its share of the global bitcoin mining market, with about 8% of all crypto mining.

As you may know, the country is blessed with an abundant supply of energy and I get the impression they don’t care so much about carbon neutrality as we do. Nevertheless, the country wants to tax crypto miners, which will make it less attractive.

But who’s to say that the U.S. won’t implement stifling regulations ourselves?

Greenidge Isn’t Really That Green

While Greenidge props up its narrative regarding carbon-neutral Bitcoin mining, the reality is that prospective buyers of GREE stock should be aware that the company itself faces some problematic challenges. As ARS Technica senior tech reporter, Tim De Chant, wrote in July, “nearby residents weren’t necessarily enamored with the idea of a pollution-spewing power plant warming their deep, cold water lake.”

And that has led my colleague Will Ashworth to warn that “the plant might someday find itself having to spend millions upon millions to fix its emissions problem. That would be costly and time-consuming. Secondly, if were to find itself operating alone again because of an environmental setback, investors would likely not give it another chance.”

While the idea sounds great on paper, that’s probably where it should be left for most investors — on paper. Back in the real world, there are simply too many risks surrounding GREE stock for anyone but gamblers to be comfortable with.

On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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