In the final months of 2024, the bitcoin (BTC) mining industry experienced a significant disruption with the emergence of a new competitor: Cango (CANG). This Chinese company, known for its expertise in offering loans to automobile purchasers, has made a notable entry into the cryptocurrency sector.
Located in Shanghai and currently valued at $363 million on the stock market, Cango is actively pursuing the acquisition of 50 exahashes per second (EH/s) in mining power. This strategic move positions the auto lending platform to emerge as one of the largest Bitcoin miners globally once its entire fleet is operational.
“It may come as a surprise to those in the industry, as Cango is not a name that has been widely recognized,” said Juliet Ye, the senior director of communications for the company, during an interview with CoinDesk. “The narrative of Cango is one of resilience and transformation.” The firm has undergone diversification into various sectors on at least two or three occasions since its inception in 2010.
Acquiring a substantial Bitcoin mining operation comes with significant financial implications. Cango has made a considerable investment, paying $256 million in cash for the initial 32 EH/s of computing power. This acquisition was made by the well-known Bitcoin mining machine manufacturer Bitmain. The company plans to issue $144 million in shares to acquire the remaining 18 EH/s from Golden TechGen, a company owned by former Bitmain Chief Financial Officer Max Hua, along with additional undisclosed mining machine vendors. Following the transaction’s conclusion, Golden TechGen and the other sellers are set to acquire an estimated 37.8% stake in Cango.
The expansion into bitcoin mining is beginning to show positive results. Cango’s stock closed out 2024 at $4.56, marking an impressive increase of over 362% since the beginning of the year. Ye announced that the new Bitcoin mining strategy had propelled Cango into the limelight in a striking development.
“Gaining traction has proven to be quite challenging for us as a small- to mid-cap listed Chinese company operating in the U.S.,” Ye stated. “Suddenly, there is a significant surge of interest in Cango.” The excitement surrounding the company is unprecedented, marking a notable departure from previous trends.
Cango primarily assists Chinese banks in facilitating loans for individuals seeking to purchase vehicles. The firm, which made its public debut in 2018, had begun diversifying its operations well before acquiring a bitcoin fleet.
Cango has begun facilitating car exports from China to various global markets and has invested in Li Auto, a manufacturer of electric vehicles based in China. After securing that investment, Cango turned its attention to potential business ventures within the renewable energy sector, focusing on high-compute power projects associated with artificial intelligence, before entering the bitcoin mining realm.
“Bitcoin mining serves as an effective method for rebalancing energy grids,” Ye stated, highlighting the ability of Bitcoin miners to turn their rigs off and on as needed quickly. In certain jurisdictions like Texas, authorities leverage this capability by incentivizing miners to function during reduced energy usage. They also compensate these miners for halting operations when local demand spikes, particularly during extreme weather events like heatwaves or blizzards.
As Bitcoin’s hash rate stands at 823 EH/s, Cango is poised to contribute approximately 6% of the overall computing power supporting the cryptocurrency, contingent upon fully activating the firm’s 50 EH/s capacity. MARA Holdings (MARA), recognized as the largest publicly traded miner globally, possessed just over 47 EH/s of computing power as of November, according to data from TheMinerMag. CleanSpark (CLSK) and Riot Platforms (RIOT) reported hash rates of 32 EH/s and 26 EH/s, respectively, positioning them as the following most prominent players in the market.
Cango’s management team emphasized the significance of scaled operations in the Bitcoin mining sector as a crucial factor in their decision to enter the market, as stated in an email to CoinDesk.
The present environment is characterized by industry consolidation, where more extensive operations are gaining prominence due to rising mining challenges and the demand for advanced hardware technology.
Cango distinguishes itself from other major players in the mining industry by currently not operating its mining fleet. Cango operates a network of machines globally, with locations in the U.S., Canada, Paraguay, and Ethiopia. Despite this international presence, the company continues to depend significantly on Bitmain for its facilities and infrastructure, ensuring the efficient operation of its sites.
“Despite our substantial computing power as we enter the industry, we recognize that we are newcomers and require time to adjust to the established norms, as well as to gain a clearer understanding of the tax landscape and the broader market,” Ye stated. “Initially, we made the decision to collaborate with Bitmain and utilize its operations teams.”
Ye indicated that the situation is expected to evolve as Cango accumulates experience in the sector and aims to enhance the economic efficiency of its bitcoin mining operations. Building an internal mining team is more cost-effective over time than depending on Bitmain’s expertise.
According to Ye, future actions regarding Cango’s increasing bitcoin reserves will be contingent on the developments throughout the year. “We are considering the potential for tactical reductions to our bitcoin holdings, depending on market conditions,” she stated. Cango extracted 363.9 BTC in November, a total valued at approximately $35 million as of the current report.