So, the Trump family is getting deeper into Bitcoin mining. One, American Bitcoin Corp., with close ties to the Trumps, plans to merge with Gryphon Digital Mining. Their listing target on Nasdaq is “ABTC”. The SEC filing – specifically the amended S-4 registration statement – is out, and while the headlines tout the potential gains, I'm seeing some significant risks that aren't getting enough attention. Risks that might just leave investors holding the bag. Let's dig in, shall we?

Conflicts of Interest?

The most egregious offense isn’t the esoteric language regarding hash rates. It's the potential for conflicts of interest, especially given the Trump family's involvement. Eric Trump as Chief Strategy Officer? Seriously? I'm not saying he's unqualified (or am I?), but consider this: the company's success is now intertwined with the Trump brand. Moreover, any future political aspirations or political controversies affecting the family would have a direct effect on investor confidence. Now, picture a world in which a Trump scandal breaks. Would you want your investment linked to that level of volatility?

It’s not just optics, because change can have very real, very real world implications. What happens when business decisions are to be made? Will they be tempted to pursue strategies that prioritize short-term shareholder value above all else? Or will the family’s broader political and business interests shape their decision-making? Unfortunately, their recent SEC filing doesn’t provide a ton of comfort on this point. It ignores the risk of divided loyalties—and honestly, that’s pretty scary.

Hut 8's Strings Attached

American Bitcoin Corp. wasn’t exactly born yesterday, either. It had been launched as a 80%-owned subsidiary of Hut 8. They are using a strategic partnership with Hut 8 to provide operational and infrastructure support for their operations. This "asset-light" model sounds great on paper. Less capital expenditure, more flexibility, right? Wrong. It creates this huge dependency on Hut 8. The third supposition is what occurs if Hut 8 gets in dire fiscal straits. What if their priorities shift? Your investment is now linked to the performance of another company, one you have even less control over.

Hut 8’s original 80% ownership is highlighted in the filing. While American Bitcoin shareholders will own approximately 98% of the new entity after the merger, the initial dependence leaves a lingering question: how truly independent will American Bitcoin be? Are people innovative enough, flexible enough, versatile enough that they can change course and change direction in the face of the orientation? Or will they forever be subject to Hut 8’s corporate strategy? This is not about Bitcoin mining, this is about control.

Post-Halving Profitability Plunge?

The Bitcoin halving happened recently. Especially that thing you heard about last year that halved the rewards for mining. The filing recognizes that, but I don’t believe they’re making a real effort to pretend that this wouldn’t have a catastrophic impact on profits. Gryphon runs currently-operating digital asset-mining facilities. As of Q2 2024, it reports having a self-mining hashrate of 899 petahash per second. However, post-halving, that hashrate must be considerably more efficient to earn the same revenue. Are they prepared for that?

Here's the brutal truth: many miners are already struggling to stay afloat after the halving. The merger, according to the two nonprofits, would help them achieve significantly more scale and operational efficiency while increasing immediate access to capital. Access to capital alone doesn’t address the challenge presented by lower rewards. It just buys you time. Unless American Bitcoin can drastically reduce their energy costs or massively increase their mining efficiency, they could be facing serious financial headwinds. While this focus on renewable energy is a welcome first step, it falls short of being a silver bullet. Natural gas asset in Canada? Great. But natural gas prices fluctuate. Mother Nature is unpredictable.

  • The Reality: Bitcoin mining is a volatile business, halving events make it even more so.

This isn't financial advice. It's a warning. The Trump family name may sell papers, but it doesn’t mean you can cash in on all that ink. So look beyond the hype, read the fine print, and know what you’re getting into before you spend a cent.

This isn't financial advice. It's a warning. The Trump name might grab headlines, but it doesn't guarantee profits. Look beyond the surface, read the fine print, and understand the risks before you invest a single dime.