Bitcoin miners sell their hodlings and ASIC prices continue to fall - What's next for the industry?

Bitcoin miners sell their hodlings and ASIC prices continue to fall – What’s next for the industry? – Mail Bonus


Cryptocurrencies are going to the left and right, and Bitcoin mining companies also seem to be absorbing water faster than they can guarantee. In mid-June, Whass Gibbs, CEO of Compass Mining, and CFO Jodie Fisher abruptly resigned after allegations that Bitcoin mining and hosting company failed to pay hundreds of thousands of dollars in overdue electricity bills to Dynamics Mining, Compass’ facility provider. .

Bloomberg recently reported that many industrial-sized Bitcoin miners have incurred significant debt by using their equipment and BTC as collateral for loans to either acquire additional equipment or expand their operations. According to the report and data from Arcane Research, miners owe $ 4 billion in loans and now that Bitcoin prices are trading close to the 2017 all-time high, the trend is for miners to liquidate their BTC assets at a volatile minimum to cover capital and operating costs. is expected to go faster.

Last month, Marathon Digital, Riot Blockchain, Core Scientific, Bitfarms and Argo Blockchain PLC sold between 1,000 and 3,000 BTC each to cover debt, operating costs (OPEX) and capital costs (CAPEX).

The problems faced by miners also have a knock-on effect on ASICs and their pricing at major mining hardware vendors such as Big Sky ASICs, ASIC Marketplace, Bitmain and Kaboomracks shows popular ASIC miners at the top and middle levels selling up to 70% down. from a historical high in the range of $ 10,000 to $ 18,000.

With data from Arcane Research showing that industry tradesmen in general trade are now selling more Bitcoin than they did in May, it is possible that some will either reduce their footprint and downsize or cease operations if they are unable to meet OPEX and CAPEX debts.

According to Jaran Mellerud, Bitcoin Mining Specialist at Arcane Research:

“If they are forced to liquidate a significant part of these holdings, it could help push the Bitcoin price down further.

Of course, news headlines and snippets tell only a small part of the story, so Cointelegraph reached out to Colin Harper, head of research at Luxor Technologies, to clarify how industry students view the current situation.

Cointelegraph: Bitcoin is trading below real and sometimes it has dipped below the cost of mining production. To date, prices have struggled to reach the 2017 historic high and the hash rate is declining. Experts in the chain usually point out that these measurements reach the very lowest lows as a generational buying opportunity. What are your thoughts?

Colin Harper: I do not like to tell people when and when not to buy. That said, I never thought we would see $ 17,000 BTC again. All around or under $ 20,000 I think is a good deal, but I’m also preparing for a lower price if that happens.

CT: What is the current state of the BTC mining industry? There are miners breaking their stacks, indebted miners could go head to head, inefficient miners turn off their equipment and ASICs are the currency of fire. The share price and cash flow of listed miners looks rather bad right now. What’s going on behind the scenes and how do you see this affecting the industry over the next six months to a year?

CH: The short, straight and narrow: Profitability is in the toilet, so miners with too much debt, high operating costs or both are shaken out. The hash rate will grow much slower this year than expected due to the profitability crisis, ASIC prices will continue to fall and lots of new miners jumping on the hash train last year will be thrown out. Miners with a total cost of less than $ 0.05 / kWh still engage in low-profit mining.

The long, lumpy and oily:

In 2021, Bitcoin’s profitability peaked for many years. At the same time, interest rates were still low and miners took on debt to finance the expansion of the hash during this boom. Now things have changed: Profitability is declining towards an all-time low, interest rates are rising, energy prices are skyrocketing and all indications are that the global recession is contracting. Lots of miners signed hosting contracts, energy contracts and other operating contracts using 2021 profitability models, regardless of current circumstances. Now that the situation in the cattle market has changed and the bear market has arrived, miners with higher costs and unacceptable debt are starting to close down.

However, we have not heard that any miner has seized equipment and forced evictions. There are plenty of self-appointed sales from miners who got ahead of themselves last year, but a lot of public miners are still mining at a healthy margin.

For the next six months, some miners, both public and private, will go bankrupt, so we expect bankruptcies and major mergers and acquisitions in the coming year. As energy prices are high and rising, miners need to be prepared to cut costs and find cheaper energy sources. Off-line mining will thrive in the years to come.

To explain this with data:

In 2021, the average hash price was ~ $ 0.30 / TH / day (so on average, a 100 TH machine like the S19j Pro would bring you $ 30 in revenue per day). At present the hash price is ~ $ 0.088 / TH / day, so the same machine makes $ 8.80 a day. If your electricity cost is $ 0.06 / TH / day, then this outfit will bring you $ 4.40 in profit (compared to $ 25.60 on average last year).

The hash price is a measure of Luxor’s Hashrate Index, which is used to calculate the expected income from the unit of the hash ratio when a miner uses a full payment per share (FPPS) such as Luxor. The hash price is given as $ per terahash per day, but terahash refers to the speed at which the Bitcoin mining machine produces calculations. At $ 0.09 / TH / day, a 100 TH machine would earn $ 9 a day when using Luxor or a similar FPPS pool.

CT: Exactly why is now a good or bad time to start mining? Are there specific chain metrics or profitability metrics you are looking at or is it just your gut feeling?

CH: Given that the price of a hash is approaching an all-time low, it is a difficult time to start mining, but the bear market will give smart investors the opportunity to lay the groundwork for flourishing in the next beef market.

Machine prices are dropping sharply, so it’s becoming much more economical to buy a new generation machine (Luxor’s ASIC trading desk has people selling the Whatsminer M30 and Antminer S19 series for $ 30-50 / TH). Of course, there’s a reason the rigs are getting cheaper, and that’s because they’re making 1/3 of what they produced last year (and they will probably do even less than that when this bear market is said to be and finished). I expect machine prices to fall further.

That being said, if you can find a favorable power ratio and / or a good hosting deal, the next few months will probably provide a favorable ASIC price for those who want to start mining. The bear market will be a great time to position you for the next bull run.

Connected: Bitcoins may not be at the bottom, but miners say it “has always made a profit every 4 years”

CT: Let’s say I have $ 1 million in cash, is that a good time to start a business and start mining? How about $ 300,000 to $ 100,000? Ranging from $ 40,000 to $ 10,000, why might not be a good time to set up a home or use a hosted mining service?

CH: Definitely not a good time to try to set up a homework business. In terms of distributing capital on an industrial scale, it really depends on the site and the expertise of the people who run it.

CT: Would you say that now is a good time for local miners to get into the game? Say regular Joe wants to run two Antminer s19j Pro with immersion setup?

CH: Unequivocally no. If it were me I would wait until the ASIC price drops further. Even then, I would like to make sure I could do something to maximize ASIC efficiency to improve ROI (for example, if you can recycle heat to heat your home, and thus not pay for winter heating or something, then are you actually speeding up your ROI because you are earning BTC and which covers the heating costs you would have to pay for anyway).

CT: How could the coming half of Bitcoin change the landscape of industrial mining and the amount of equipment needed to solve algorithms that will be harder to crack with each half?

CH: Bitcoin miners will try to increase their hash rate as much as possible before halving. Rising energy prices and low profitability will hamper this (some), but miners with cheap costs and conviction will expand their fleet accordingly. In terms of industrialization, it certainly seems that mining is heading in that direction, although I think the balance will change as energy producers (oil companies, renewable farms, energy authorities, etc.) start mining bitcoin on the order of magnitude – energy costs and shrinkage pressures could limit which we see in the Riot Blockchain and Core Scientific-sized miners in the industry.

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