BitFuFu’s Recurring Revenue Model Offers Stability in a Volatile Crypto Market

In a harshly competitive market what we, as investors, are really buying is a good management team. For competition will change the way that marketplace is working over time. It is the speed and skill of the management is responding to that that will determine the medium term performance of the investment. So, that’s the task, looking for management who seem to know what they’re doing.

In Bitcoin and associated markets we do seem to find this with BitFuFu Inc (NASDAQ:FUFU). Or, at least, that’s my contention from looking at what they’re currently doing. 

We’ll get to the details in a moment, But as an oversight we know that scale matters, scale really matters, in Bircoin. Being large enough not to have to join other peoples’ mining pools for example - and therefore capturing the margin from running the pool. Similarly, being large enough to be able to scoop up good energy deals - by far the largest operating cost is the simple energy cost. Similarly, scale means being able to build one’s own data centres, order chips in bulk - and avoid that margin killer, buying retail - and so on.

So, doing pretty much anything to gain scale is a useful thing to be doing - because scale is where the margin is. We might even suggest that operating mutiple activities, revenue streams, if they contribute to scale are worthwhile. Even if the activity itself isn’t particularly profitable just that addition of scale improves margins over all of the business. 

So, what we end up with is a capital light mining operation. The cloud side has some 60,000 clients each paying a monthly fee for access to computing power and the system. The point from the corporate side is that that is all revenue which builds the hash rate and bulks up the power buying side - increasing margins on the whole business. This leverages the other capital light part of the business. Which is not so much to own but to lease facilities themselves. 

Think about this for a moment. Those buying cloud mining think that they are buying a service. From the point of view of the company they’re providing capital - but they’re not being paid the cost of capital. The point about this is that this is a clever business model. The very thing we’re looking for.  

We can also run with a slightly more tactical than strategic view. 

The specter of a global economic slowdown has reemerged as a pressing concern for investors. President Donald Trump’s recent "Liberation Day" announcement has reignited fears of an escalating trade war with potentially far-reaching economic consequences. Financial markets reacted swiftly: U.S. equities saw a surge in volatility, bond yields spiked, and stagflationary concerns regained prominence among institutional players.

This evolving macroeconomic backdrop, marked by potential rewiring of global trade, presents both risk and opportunity. While traditional sectors face headwinds from rising import costs and disrupted supply chains, certain alternative assets and industries are showing signs of relative resilience or even potential upside.

One standout segment amid this uncertainty has been digital assets. Bitcoin, in particular, has surged back to nearly $100,000 following Trump’s tariff rhetoric, reinforcing its emerging role as a hedge against currency debasement and macroeconomic instability. More intriguingly, shares of cryptocurrency mining firms rallied in tandem. Marathon Digital Holdings (NASDAQ:MARA), the largest publicly listed U.S. miner has gained over 17 percent since Trump’s tariff announcement. This performance suggests that investors are beginning to distinguish between industries directly exposed to tariffs and those potentially positioned to benefit from a fragmented global economic order.

Against this backdrop, there is growing investor interest in the structure and strategy of cryptocurrency infrastructure companies. Some firms are proving more adaptable than others, both operationally and financially.

BitFuFu is, as we know, a US-listed cloud mining and hosting platform offering exposure to Bitcoin mining economics through a capital-efficient model. Backed in its early days by Bitmain, BitFuFu gained not only capital support but also priority access to mining equipment. However, instead of building massive asset heavy operations from the start, BitFuFu adopted a capital light model, leasing hash rate and energy capacity while offering cloud mining services to over 600,000 users globally.

Bitmain itself has significantly diversified its manufacturing base, operating across countries in Southeast Asia and the U.S. As a result, the supply chain for mining hardware is more geographically distributed than often assumed, providing some insulation from tariff risks, at least in the near term.

BitFuFu’s hosting operations are similarly global, spanning Ethiopia, Indonesia, Brazil, and beyond. This distributed footprint enables the company to dynamically adjust its operations based on local cost and regulatory shifts, an agility that traditional location-bound miners lack.

Moreover, BitFuFu’s model supports more predictable revenues. Rather than depending solely on Bitcoin block rewards, it earns recurring income through service fees from both retail and institutional clients. The company is actively expanding its institutional offerings as well, ranging from custody and hardware brokerage to white label mining services designed to deliver Bitcoin yield without operational complexity.

Financially, BitFuFu is gaining momentum. The company reported 2024 revenue of $463.3 million, up 63 percent from $284.1 million in 2023. This growth was driven by expanded cloud mining through effective customer acquisition and self-mining capacity. While the company continues to emphasize operational flexibility, it is also selectively expanding its owned data center capacity to strengthen long-term control and reduce energy and electricity costs. Management aims to scale owned power capacity to 1 gigawatt by 2026, a clear signal of ambition to become a global mining infrastructure leader.

Yet despite this growth trajectory, BitFuFu remains significantly undervalued relative to peers. Consider the price to sales comparison:

• Marathon Digital (MARA): $656.4M FY2024 revenue, $4.86B market cap = 7.4x P/S
• BitFuFu (FUFU): $463.3M FY2024 revenue, $534M market cap = 1.2x P/S

This implies an 83.8% valuation discount, despite BitFuFu’s transition to profitability and more diversified, recurring revenue streams. While Marathon’s higher liquidity and U.S. footprint justify some premium, the scale of this gap appears excessive given BitFuFu’s operational flexibility and earnings visibility.

If tariffs do intensify and trigger recessionary conditions, firms with capital efficient models, diversified global operations, and stable income streams will likely be more resilient. In this context, cryptocurrency infrastructure companies structured more like service providers than industrial miners stand out as attractive investment candidates.

BitFuFu’s deep valuation discount, paired with its strategic advantages, suggests meaningful upside potential, especially as investors become more attuned to capital efficiency, geopolitical diversification, and recurring revenue strength within the digital asset ecosystem.

It’s up to us which view we prefer. Do we want to think of what the company’s actually doing and the relationship between that and their current marketplace? Or are we more interested in having a clever management team working on our behalf? 

I like both ideas myself.