👉 Background: Iris Energy is an Australian based crypto miner. It runs high-powered computers that crunch complex maths equations to mine bitcoin and then collect a portion of the new coins created.

👉 What happened: Iris Energy borrowed over $163m to power these bitcoin mining machines. But now, it has decided to not repay these debts. Why? Well, the value of the crypto mining machines is actually less than the debt outstanding on them.

👉 What else: Since Iris Energy listed on the NASDAQ in November last year, it has lost 95% of its value. And many large investors who wanted exposure to the crypto industry are down big time. So the old pick and shovel strategy doesn’t work when the whole industry is going down.

What's the key learning?

💡A pick and shovel investment is the strategy of investing in the materials used to produce a good or service… instead of the final output. The idea is that it’s a way to invest in an industry without having to bear the risks of the market.

💡This investment strategy is named after the tools needed to take part in the Gold Rush. While not all gold diggers made money, they all needed equipment to dig. And during the Gold Rush, those selling the equipment made bank!

💡In this case, cryptocurrencies like bitcoin or ethereum are the gold. Iris Energy could be a pick or shovel and give exposure to the industry. But although the strategy can help reduce some risk for investors, if the industry struggles, then the pick and shovel suppliers stuggle too.

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