Bitcoin mining sector is in deep crisis
Bitcoin mining sector is in deep crisis
Mining

Bitcoin mining sector is in deep crisis

By Andrea Porcelli - 23 Jan 2023

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The market prices of major companies engaged in the mining of Bitcoin and other cryptocurrencies collapse deeply. 2022 has thrown the entire crypto ecosystem into crisis, even spreading to the mining sector, which has lost billions of dollars in share value.

According to data from Bitcoin Casinos, five of the most important mining industries lost a lot of value in market capitalization. 

2022 was a bad year for Bitcoin mining

5.2 billion dollars, this is the amount lost collectively by the 5 industries engaged in Bitcoin and cryptocurrency mining. An exorbitant figure relative to the drastic crisis in the crypto world in 2022. The stock values of these companies have fallen more than half during this period, and they seem to be having a very difficult time recovering.

Riot Blockchain, Marathon Digital Holdings, Canaan Inc, Cipher Mining Technologies, and Hut 8 Mining are the world’s most prominent crypto mining companies. Their combined shares amounted to $8.5 billion last January. Today that share has fallen by a whopping $5.2 billion, a drop of about 61%. 

Most notably, Riot Blockchain had a 12-month drop of 57%, losing about $1.3 billion in share value. While Marathon Digital Holdings, the second largest, lost 68%, dropping from $3 billion to $980 million, moving out of the billion-dollar range. 

The fall in mining revenues

Daily revenues related to cryptocurrency mining alone, fell 61% on a year-over-year basis. Thus, it is not only the big mining companies that are suffering from this crisis. But rather, anyone trying to get revenue through mining Bitcoin and other cryptocurrencies.

Data show that there are no more profits for Bitcoin miners, and it is currently difficult to get cheap electricity to run efficient mining platforms. 

Analyzing the specific data, miners’ average revenue was $41.1 million. By June 2022, that figure had almost halved to $27.9 million, clearly reflecting the decline in the price of Bitcoin

From June onward, it has been a dismal descent to today’s figures of about $16 million. A decline of about 60% year-on-year. 

Very few miners are reaping the profits. Miners are forced to pay electricity to the tune of $0.12 per kilowatt hour (kWh), so there are very few mining platforms that can be called profitable. 

Data indicate that the cost of Bitcoin production ($19,356 per unit) is much higher than the spot market value ($16,877 per unit). This means that Bitcoin miners must obtain the cheapest electricity they can find on planet earth and operate with the most efficient Bitcoin mining devices on the market today.

It clearly all boils down to the factor that has affected the lives of many in 2022, the price of electricity in many countries around the world has risen, including countries where Bitcoin mining has a large presence. Only a few countries can enjoy cheap electricity rates compared to others, but that is not the only factor involved in mining Bitcoin or other cryptocurrencies. 

Mining crisis could lead to ecological benefits

However, the crisis in the mining industry is bringing forth new thinking in the area of energy. The crypto winter brings with it industry crises, loss of money, failed companies, but what if it also brought with it environmental benefits?

Work is becoming more difficult for miners, so solutions to this could lead to wider use of green cryptocurrencies. 

However, it is still too early to talk about real environmental benefits, which certainly will not be triggered by the momentary collapse of Bitcoin network emissions. 

Moreover, looking at the graph of the hashrate (the computational power of the Bitcoin network), we note the absence of major declines during the first months of this crisis. In fact, an annual peak was even recorded on 12 June. This means that the “mining farms” (sheds or factories filled with computers aimed at mining new crypto) are not stopping working and using their usual amount of electricity. 

We have talked about it before, renewable resources could be the most important trend of 2023. The crisis in the mining industry could usher in the rise of cryptocurrencies that use renewable resources, also referred to as green crypto. 

Certainly to get to an exclusive use of renewable resources, 2023 will not be enough. But the signs point to a concrete future in terms of finding renewable resources. We shall see what 2023 has in store in the ecological sphere. 

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