Public Bitcoin Miners Struggle for Survival

Bitcoin Magazine ProHash rate experienced its first major drawdown in July 2021. Public miners are feeling it as tough conditions could last for a sustained time. Subscribe now to get these insights and other on the-chain bitcoin market analysis right to your inbox. The mining industry continues to suffer from rising energy inflation, depressed bitcoin prices, and debt burdens. We saw a 13.1% decrease in hash rate since its all-time highs at the end of November. This is still a small percentage of the major hashrate declines since 2016. It’s not as bad as the few down periods of over 15% that occurred during that time. The latest 7.32% downward difficulty adjustment was made in response to all that hash rate loss. The hash rate today is at 250 EH/s, which is down 7.84% from the 273 EH/s peak. This is the largest downward adjustment since July 2021 when there were a series of downward difficulties adjustments after the Chinese mining ban. This should provide some temporary relief for current miners. However, it’s too early in the year to know if the trend in declining hash rates has ended. The hashrate drawdown from all-time highs was less than the average bear markets. We aren’t seeing any announcements from major public miners despite the latest drawdown in hashrate. The hash rate of most public miners is either flat or growing over the past month. The public bitcoin miners hashrate remains steady. According to those who have provided monthly production updates, bitcoin holdings are steadily rising from the largest three treasuries in Riot, Marathon, and Hut 8 accounting respectively for 27,579 and 27,679 bitcoin. Bitfarms have sold significant amounts from their treasury, which is likely due to their current debt obligations. The largest mining companies are increasing their bitcoin holdings. When looking at the year-to-date returns of bitcoin, the performance of miners continues to decline. When assessing the prospects of investing in bitcoin miners, we found that the hash price bear is still alive and well. Any short-term outperformance by bitcoin miners has been a market opportunity to lower the equity’s price. The market caps of six public bitcoin miners in a proxy basket shows how much value has been lost since 2021. The market has seen a 452% increase in value from its November 2021 peak at $19.1 billion. This is a mere one-year mark. However, we expect the market to remain tough for a long time, which will squeeze many market participants. Although the recent difficulty adjustment provided some relief, it is not enough for many miners who bought large amounts of their machines in 2021 and expected $30,000 in the worst-case scenario. Add to that the fact that global energy prices have risen dramatically and interest rates are high, and many operations find themselves in extremely difficult situations. This is especially true for hosting facilities that serve as intermediaries for customers who want to mine bitcoin. The reality is that many of the largest hosting facilities in the industry are either bankrupt or on the brink of bankruptcy. We will be closely monitoring hash rate and the current state of the mining sector. Although the industry has been in decline over the past 2022, we believe it is not yet out of the woods. The beauty of bitcoin and capitalism lies in the fact that only the strong will prevail. Regardless, blocks will continue to be mined every approximately 10 minutes.Relevant Past Articles:Not Your Average Recession: Unwinding The Largest Financial Bubble In HistoryJust How Big Is The Everything Bubble?Inflationary Bear Market Spells Trouble For InvestorsThe Bond Market Meltdown Continues: Where Are The Buyers For ‘Risk-Free’ Government Debt?Brewing Emerging Market Debt CrisesTagsterms:Marathon Digital HoldingsHut 8Public MinersRiot Blockchainhive blockchain technologies

 

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