But Iris is at the start of what should be a rapid rise in computing power, which in the bitcoin world is expressed in exahashes (EH/s) per second. In the March quarter, Iris had 0.8 PE/s, but expects to hit 10 PE/s early next calendar year before reaching its ultimate goal of 15 PE/s later the same year.
To achieve this, Iris has built or will build four data centers (three in the Canadian province of British Columbia and one in Texas) powered by renewable energy. At the bitcoin price of $40,000, Iris believes she can generate $505 million in profit at 10 EH/s and $761 million in profit at 15 EH/s.
Roberts is thrilled with the progress made by Iris’ team of infrastructure veterans. But the fall in bitcoin price is not easily ignored. Will Iris’ economy continue to accumulate?
“We can ride the volatility”
Roberts is confident. First, the cost of producing Iris per bitcoin over the past few months has been between $8,000 and $8,500, so theoretically bitcoin could drop much further before its profitability is threatened.
Second, the data center it is building in Texas, which will account for 63% of its computing power, will have energy costs 30-40% lower than its other sites, further reducing its cost of production.
Third, a drop in bitcoin price is likely to force other bitcoin miners with higher energy costs out of the market; fewer miners in the market means that Iris will get a larger share of bitcoins mined every 10 minutes.
“We’re looking at the profitability of our operations, the operational levers we can pull if bitcoin has an extended pullback,” Roberts says. “We are a real asset company, we are very profitable, we can ride the volatility and be there when the good times come.”
Roberts argues that it is important to separate the stablecoin crash that has panicked crypto markets in recent days from bitcoin. Stablecoins, he says, are early-stage experiments that should be treated as such. Bitcoin, on the other hand, “has been a finished product for a decade” and offers much greater protections in terms of security levels and the fact that only 21 million coins will be mined.
Roberts says a period of “creative destruction” in crypto could be healthy in the long run, just as it was for economies.
“It’s a very effective innovation environment, and arguably when you have those moments of discovery around asset value and those innovations, and you get a pullback, that washout is really good for the industry because you People take stock again of what’s valuable, why it’s valuable, and you can build sustainably again.”
Right now, that sounds like a very optimistic view. Roberts may be able to distinguish between the more speculative parts of the crypto world and bitcoin, but how many other investors will do the same?
The big question raised by the stablecoin crash is how far the contagion is spreading. The losses investors are incurring in their stablecoin wallets have already trickled down to bitcoin and other more established digital assets. Will crypto losses trickle down to stocks as well?
Retail crypto investors will likely be the hardest hit. But it’s hard to see institutional investors stepping in to rescue crypto assets in the same way they might step in to buy battered stocks — most professional investors have more than enough volatility in their stock portfolios. and won’t want to add more.
Roberts and Iris could potentially provide a test of investor appetite for the sector. Iris has secured $750m of the $1bn capital it needs to hit 15 PE/s, but will need to tap debt markets for additional funds.
Roberts is confident that a debt-free balance sheet, strong free cash flow and fundraising track record will help Iris convince true believers to support the company’s growth. “It’s a tough macroeconomic environment, and we respect it. But also, I think we put ourselves in a very good position.
Will the market recognize it? The speed at which unrest is spreading through crypto right now makes it impossible to respond.