Summary I rate Bit Digital (BTBT) as a Hold due to its ongoing transition to Ethereum staking and high-performance computing, with upside potential not yet realized. The company's revenue and profitability remain volatile as it shifts away from Bitcoin mining, with meaningful returns expected only after 2025 as new data centers come online. Recent IPO financing and strong liquidity provide a solid runway, but current valuation suggests further downside until fundamentals stabilize and growth initiatives mature. Technical indicators and peer comparisons support a neutral outlook, with consolidation likely around $2 per share until catalysts or operational progress emerge. Introduction & Investment Thesis I am rating Bit Digital as a Hold Inc. (NASDAQ: BTBT ) driven by the Bit Digital shift to Ethereum and High-performance computing. The company has quadrupled its Ethereum stake to 121,075 ETH so far. While this remains a leverage point for the company, I am rating this stock as a hold because as soon as the shift announcement was made, its price immediately returned to cross the S&P 500 . However, after the hype, the stock returned to trading below the S&P 500, with a current difference of about 180%. The company’s price return has not been doing well YTD and has been volatile, which, to me it means that there is potential for upside from the shift, but not now. Seeking alpha After the shift to ETH, the break-even point is estimated to be reached within a 1-year timeframe, which means that investors have to wait until around this time to see meaningful returns. On the other hand, the company is still expanding its revenue base, which includes investment in HPC . I believe that the sale of 27,043,747 shares of its subsidiary, which raises approximately $145.1 million , supports my view that the fundamentals are still in the early stage of generating income, hence my hold rating. Let’s get to the depth of this below. Company Brief Bit Digital Inc. operates digital infrastructure and asset sectors. The company and its subsidiaries are investing in Ethereum staking and high-performance computing (HPC) data centers to provide colocation and hosting services along with cloud-based GPU solutions. These services are also tailored to host machine learning applications and AI. Bit Digital is also engaged in practices such as positioning itself as an intersection of blockchain technology and advanced computing. The company was founded in 2015 and is headquartered in New York. On The Journey But Not Yet To The Destination I will first draw your attention to the 18% upside Bit Digital experienced after the shift and provide you with this picture. This shows that the upside was driven by Ethereum’s potential. I believe that this upside was driven by the Ethereum price prediction of around $2,400 by 2030. THEBIT Journal This upward projection is driven by a myriad of activities in the US investment market, as top asset managers , including Ark Invest, BlackRock and Grayscale, are applying for Ethereum ETFs. This expansion of the Ethereum network is projected to lead to upside potential above. However, since Bit Digital is still in the early stages of recording returns from its stake, the Ethereum staking calculator indicates an annual return rate of around 4% in one year. This makes the shift to Ethereum not a short-term investment but a long-term one. Blocknative calculator From this observation, I believe that the stock will remain within its current price for a while before the shift starts to record sizable revenues from compounding stake YoY, as demonstrated above. The company is still planning to close its bitcoin mining operations to transition to an Ethereum-focused strategy. This suggests that the transition phase is still ongoing and, therefore, the full benefits of shifting to Ethereum have yet to be fully realized. BTBT The company is considering Ethereum’s versatility over Bitcoin due to its ability to earn rewards such as those offered by various blockchain s and DeFi applications, as well as its programmability and long-term value. However, while Ethereum has an optimistic upside potential from 2025 through 2030, Bit Digital’s early investment in this digital coin is based on a long-term outlook rather than a short-term one. On the other hand, I am also examining the IPO , which saw Bit Digital retaining 74.3% of WhiteFiber shares after raising $145.1 million . The company is funding its HPC through IPO financing, which, in my view it’s a sustainable expansion financing. I believe so because this move in my view balances capital infusion with strategic control. That is so because it is exploring long term growth without overleveraging or sacrificing core assets. By transferring its entire HPC business into WhiteFiber and securing 24 months transition service agreement, I think the company preserves operational stability and scalability because the funding will finance growth and the 74% retained stake ensures governance continuity. The structure avoids debt burdens hence enabling the company to seek long term growth without long term financial obligations. Nevertheless, this investment is also still in the early stages because the company’s MTL-3 and MTL-2 data centers are expected to commence operations by the fourth quarter of 2026, and NC-1 is scheduled for early 2026. In this shift to data centers, Bit Digital enters the category of Bitcoin mining companies, exploring how to repurpose their GPU-rich centers into Data centers. There is an opportunity in the data center market to generate revenues from the overall $7 trillion in capital outlays by 2030, making it a lucrative market for Bit Digital to enter while it’s still in its infant stages. The global demand for data centers is yet to triple by 2030, which could possibly lead to a deficit. There is also a rise in AI workloads, which are expected to drive approximately 70% of data center growth, accounting for $5 trillion of the $7 trillion overall data center capital. This is driven by a 2.7x increase in demand for data centers from 82 in 2025 to 219 in 2030, which reveals that the sector is rapidly growing and prepares Bit Digital to capture the market. McKinsey Therefore, both Shift to Ethereum and investing in HPC are yet to provide a stable and consistent cash flow though they are promising initiatives. I believe this is why the stock is trailing the S&P 500. Therefore, as Ethereum compounding rewards continue to consolidate, along with the commencement of MTL-3 and MTL-2 operations in Q4’2025. For this reason I think a hold rating is justified Financials In terms of financials, Bit Digital’s annual revenues increased significantly between 2023 and 2024, primarily due to gains from the appreciation of Bitcoin’s value. Except for 2022, when Bitcoin was selling at an average of $20,000, resulting in a negative revenue growth of 66.39%. From FY2023 to date, the revenue increase has been in excess of double-digits. However, since the company started shifting from bitcoin mining to Ethereum, the quarterly revenue YoY has been declining from 266.45 in Q1’2024 to an average of negative 15% revenue growth YoY. Stock Analysis This indicates that the shift has not yet started generating income due as the reorganization is still in the early stage. The expectation of revenue generation is expected around Q4’2025, which is why I am holding this stock. Regarding profitability, a good reflection of volatility is seen in companies’ quarterly net profit records. The company exhibits inconsistency at this phase, which is why you should hold this stock until the net income generation stabilizes. Since 2022, when bitcoin began a steep upside move, when the revenues have consistently been rising as noted above, the company has been recording net loss except for 2024, through TTM recording net profits and net loss sequentially. Stock Analysis This volatile net income reveals that volatility due to shift results in inconsistencies at the reorganization stage. This can also be seen in the change of gross profit margin which has been very turbulent. Seeking Alpha All this volatility is a reflection of the company’s ongoing reorganization which is expected in the short term and likely to improve if the plans being executed become fruitful. Overall, when I look at the HPC plan , it is a promising venture. This is because it is targeting a booming $581 billion AI and HPC market by 2035. IDTechEx Research Given the upcoming data centres like MTL-2, MTL-3 and NC-1 are poised to go live, this plan aligns with the rising demand for exascale computing and Ethereum native services. However, as I mentioned earlier, the company is currently undergoing a major reorganization. For example, for the first time it entered into a debt arrangement with the Royal Bank of Canada for approximately $43.8 million in debt financing. The debt proceeds will finance MTL-2 and MTL-1 data centers. These pointers show that the company is currently in a state that can be described as a restructuring phase. I believe this company may see potential upside in mid-2027, after recording revenue of $172.04 million in FY2026, when it is expected to have settled its shift plans, focusing more on profitability. Most importantly, despite its new loan facility, the company is still in a firm financial footing given its strong liquidity of $181.2 million in cash and ST investments. This compared to its total debt of $43.8 million translates to a net cash of $137.4 million. Assuming its trailing total operating expenses of $91.1 million, the net cash has a runway of about 1.51 which translates to a runway of more than 1 and a half years which I think is solid and takes us past the 2026 FY where a substantial revenue is expected to start streaming in from ongoing plans. Valuation & Technical View Taking the P/S metric and comparing Bit Digitals to that of its competitors, Similarweb Ltd. (NYSE: SMWB ) and Docebo Inc. (NASDAQ: DCBO ), the valuation shows my early concern. The P/S ratio of BTBT is 4.62x, and this has gone down from 7.21x after the company announced its shift. This indicates that the hype created by the shift led to a 7.21x return after which there has been a market correction. Given that BTBT is still ahead of its competitors, SMWB’s P/S ratio of 3.20x and DCBO’s P/S ratio of 4.06x indicate that BTBT has high growth expectations. Seeking Alpha When I take this further and look at the BTBT’s trailing revenue growth of 13.30% YoY compared to DCBO’s and SMWB’s 15.11% and 16.06% respectively, I can see that the current market correction was justified and this stock could see another slight decline to take the P/S to between 3x-4x where it has been in the past before the hype. I am simply saying the market correction is not yet over and it could stop within the region I have mentioned. Given that the ongoing initiatives are more of a speculative play now, looking at the technical indicators can solidify the outlook of this stock. Having said that, I will look at both the MACD and the RSI for a comprehensive conclusion. The MACD is currently facing downwards with the MACD below the signal line an indication of that the current downtrend is still on. However, looking at the RSI which has been trending downwards signaling the ongoing correction appears to be flattening. Seeking Alpha To me this shows a potential neutral plateauing of this stock in the near future which aligns with my previous outlook of the P/S. I expect this stock to fall to about $2 which is its strong support and enter a consolidation phase which is already being hinted by the RSI being at around 40 which is a sign of a neutral outlook and by it showing signs of flattening. I believe when the stock falls to this stage there will by minimal movement unless another catalysts perhaps news pops up and triggers a rigorous activity which could also correct in the short term. Until the current initiatives pays off, I don’t see any notable support for an immediate and sustainable uptrend and this can be confirmed by the weak momentum. As such, I recommend holding this stock. Seeking Alpha Risks Advancing technology - Blockchain and AI increased risks. Bit Digital’s HPC investment from miners using high-speed HPCs. Regulatory risks – The cryptocurrency taxes and rules surrounding anti-money laundering may impact Bit Digital, directly impacting how it will continue to stake digital assets. Cryptocurrency volatility – The fluctuation in Ethereum prices may impact Bit Digital’s revenue generation, potentially delaying its gains from the current projects. Conclusion I am reiterating my hold rating on BTBT, driven by the ongoing shift activities that are still underway, as the company transforms into a complete Ethereum staking and data center service provider. The revenue returns for this shift have not been fully received, which currently places the company as a Hold.
