Comment More expensive Bitcoin is the last chance of crypto miners after a harsh winter, written by the Comparic.pl team

Dov Herman

2 years ago

Bitcoin (BTC) New Year’s rally is reviving many cryptocurrency mining companies as they try to protect themselves from bankruptcy after one of the most devastating quarters in history for the still young industry. Whether they will be able to return with a shield and not on a shield is still a big unknown.
More expensive Bitcoin is the last chance of crypto miners after a harsh winter

Rising Bitcoin helps cryptocurrency miners’ stocks

High electricity costs, a sharp decline in digital asset prices, and intense competition in the fourth quarter have slashed mining profit margins and made it harder for miners to stay afloat. Core Scientific Inc, the largest public BTC mining company by computing power, has gone bankrupt, with many major miners warning of a drop in liquidity. While struggling miners have found some relief thanks to Bitcoin’s 40% growth this year, they are still under financial pressure. Bitcoin’s rise in value has made it easier for miners to raise funds from the capital market after debt financing options exhausted and interest payments outstripped cash flow towards the end of the year.
Bitcoin rebounds from last year’s lows by 60%. Source: Tradingview.com Miners like Marathon Digital Holdings Inc. and Riot Platforms Inc. are now among the best-performing U.S. stocks this year, gaining more than 75% each after falling in value in 2022.
RIOT and MARA stocks have fared significantly better than the broad S&P 500 stock index since early 2023. Source: Tradingview.com – Public market investors are not usually the ones looking at hashing power and mining machinery. Their investing is based on the price of Bitcoin, said Ethan Vera, COO at Luxor Technologies, a cryptocurrency services company. Trade cryptocurrencies, stocks and Forex as CFDs with Vantage Marketes. Access global markets on ProTrader with TradingView charts START INVESTING

Miners are doing better, but the situation is still difficult

Marathon canceled the release of its fourth-quarter results on Tuesday after it said there were “accounting errors” in its financial statements in several quarters. The U.S. Securities and Exchange Commission (SEC) has sent questions to the company about how the miner recognized the impairment of digital assets and revenues. In the most recent quarter, Greenidge Generation Holdings Inc. was able to reschedule an $11 million debt with investment bank B. Riley, which was allowed to purchase stock at a discount in late January. Terawulf Inc, which has been backed by celebrities such as Gwyneth Paltrow and Mindy Kaling, was able to defer amortization after raising $32 million in capital proceeds in February. Even bankrupt Core Scientific received court approval to refinance its loan so it could continue operating. Mining equipment and Bitcoin sales have also helped miners to reduce leverage and restructure debt.
An ETF called Valkyrie Bitcoin Miners, which tracks the shares of the largest publicly traded miners, clearly shows how the industry collapsed in 2022. Source: Tradingview.com Even with multiple liability restructurings, many miners still face serious financial problems. Bitcoin mining is an energy-intensive process where miners use hundreds of thousands of powerful specialized computers to secure the Bitcoin blockchain and earn rewards in the form of new tokens.

Will this summer bring a “repeat of entertainment”?

However, we are slowly approaching the period of the year that may bring a new heatwave. When very high temperatures hit cryptocurrency mining centers like Texas in the past, electricity costs tended to skyrocket. Nearly all large-scale miners in Texas shut down during last July’s historic heatwave. Miners may be even more vulnerable to electricity price fluctuations this summer, as most do not have the capital to place sufficient collateral for power purchase agreements where buyers can lock in a certain electricity price for a period of time. “Most miners just take advantage of lower energy costs and cross their fingers and hope the price doesn’t go up and hurt them too much in the future,” Vera said. The continued high level of online competition also keeps mining revenue low even if Bitcoin prices go up. Mining difficulty, or hash rate, is a measure of the computing power to extract Bitcoin. It has been breaking value records since the end of 2022.
Historical change in the hash rate in the BTC network. Source: Tradingview.com Miners compete for a limited supply of rewards released from the blockchain. Better capitalized miners continued their activities, waiting for others to simply drop out of the game. Severe storms in North America in the fourth quarter not only forced most of the region’s miners to shut down with skyrocketing electricity costs, but caused damage to their machines. Riot Platforms, which has one of the largest operating mining facilities in Texas, revealed that some of its mining machinery is still shut down due to the harsh winter in December.
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