LM Funding America Inc. (NASDAQ: LMFA) Increasing Mining Value During the Bitcoin Boom
Founded in 2015, LMFA initially grew through purchasing delinquent receivables from HOAs. While stable, this model offered limited growth. By 2022, the company shifted focus to Bitcoin mining, aligning with cryptocurrency’s growing institutional acceptance.
This transition introduced challenges like high capital expenditures and energy demands. However, LMFA’s leadership bet on the long-term potential of Bitcoin, particularly during bull markets, to deliver superior returns.
LMFA exclusively mines Bitcoin, prioritizing its dominance in market capitalization, liquidity, and institutional backing. Unlike mining alternative coins, this focus reflects a commitment to the cryptocurrency most widely recognized as a store of value.
The profitability of mining operations hinges on Bitcoin prices. For LMFA, the breakeven point is around $60,000 per Bitcoin. While prices below this threshold during 2022-2023 led to operational losses, Bitcoin’s current price surge has positioned the company to generate significant profits in the ongoing bull market.
Bitcoin’s current rally reflects several macroeconomic and market factors. Historically, Bitcoin has followed a four-year price cycle driven by halving events, which reduce the supply of new coins. The most recent halving in April 2024 cut mining rewards in half, reducing Bitcoin’s issuance rate and increasing scarcity.
This supply constraint, coupled with growing institutional adoption through Bitcoin ETFs and an anticipated shift in Federal Reserve monetary policy toward lower interest rates, has fueled the ongoing uptrend. Market participants widely expect Bitcoin to reach new highs by 2025, further supporting miners like LMFA that can operate profitably at these elevated price levels.
Bitcoin’s rise is not only a product of its unique monetary design but also its increasing integration into global financial systems. Major asset managers like BlackRock and Fidelity have launched Bitcoin ETFs, broadening access for retail and institutional investors. This growing acceptance underscores Bitcoin’s transition from a speculative asset to a long-term store of value.
Cryptocurrency mining now accounts for over 96% of LMFA’s revenue, making it the cornerstone of its business model. Therefore, LMFA’s financial performance mirrors Bitcoin’s volatility. During 2022 and 2023, the company reported losses in its cryptocurrency mining operations, primarily due to high electricity costs, equipment depreciation, and low Bitcoin prices. However, as Bitcoin prices surged past $100,000 in late 2024, the economics of mining shifted dramatically in LMFA’s favor, improving its financial outlook.
As of September 30, 2024, LMFA held 142.3 Bitcoin, valued at $14.5 million at a price of $102,000. In Q3 2024, LMFA mined 18.5 Bitcoin, generating $1.1 million in revenue at an average price of $60,870. However, total quarterly revenue declined to $1.3 million, down $2.1 million from Q3 2023, reflecting the halving event’s reduced mining rewards and equipment repositioning to new, cost-effective hosting sites.
On the expense side, LMFA demonstrated improved operational efficiency. Q3 2024 operating expenses decreased to $5.7 million from $6.6 million year-on-year, driven by lower mining costs despite increased depreciation and amortization. These efficiencies stem from LMFA’s vertical integration strategy, which prioritizes cost-effective power sources and optimized operations.