If energy prices continue their downward spiral and the price of bitcoin (BTC-USD) doesn’t fall back to the mid-teens, then “I think it’s going to be pretty good” for bitcoin miners and “I suspect the worst is over” for them, Christopher Bendiksen, Bitcoin Head of Research at CoinShares, told Seeking Alpha in a recent interview.
Indeed, in recent months natural gas prices have erased much of last year’s extraordinary gains fueled by Russia’s war in Ukraine, in part due to an unseasonably warm winter. This in turn could bode well for Bitcoin (BTC-USD) miners as lower energy/electricity prices would increase their profitability, which is largely dependent on their ability to secure cheap energy.
Another big source of profitability for miners is the price of bitcoin (BTC-USD), whose downward momentum over the past year has not been favorable for the troubled industry. However, year-to-date, the token has seen significant progress, climbing around 30% from Friday afternoon.
This dynamic appears to have been partially reflected in many of the nine public bitcoin (BTC-USD) miners analyzed by Seeking Alpha for January. The average bitcoins mined increased by 18.3% compared to a month ago, while the average hash rate increased by 5.0%, as seen in the table below. Note that Hut 8 Mining (NASDAQ: HUT), Greenidge Generation Holdings (NASDAQ: GREE) and Sphere 3D (NASDAQ: ANY) have yet to release their numbers for January.
On the less positive side, the so-called bitcoin mining difficulty (BTC-USD), a measure of how hard it is to mine a new block for the blockchain, was at an all-time high of 39.35 trillion as of February. 6 compared to 34.09 trillion in the period a month earlier, according to data from Blockchain.com. While the higher weight suggests that the network is more secure from attack, it also means that more computing power is required to mine the same number of BTC blocks, a move that makes it harder for miners to be profitable. Still, the bitcoin network’s estimated hashrate, which measures how much computing power is used to process transactions on the blockchain, was 277.49 million terahasshes per second (TH/s), down slightly from the record 295.09 million TH/s on 29 .January and more than 270.91 million Th/s a month ago.
However, there are some positive developments to look forward to, most notably the upcoming bitcoin (BTC-USD) halving event, in which the transaction reward for mining BTC is reduced by 50%. In theory, the number of new bitcoins entering circulation (token supply) decreases while demand remains the same, therefore the price of bitcoin should rise. The BTC halving occurs every four years (or every 210,000 blocks), and the next one is estimated to occur sometime in 2024. “If previous cycles are anything to go by, then the ‘halving’ should have a positive narrative effect on bitcoin (BTC- USD) of demand,” Bendiksen pointed out.
“After the halving, we’ll probably have to go to at least $30K to make many miners feel comfortable,” he added, noting that miners have different cost bases. Bitcoin (BTC-USD) has changed hands for $21.72K at the time of writing.
For bitcoin (BTC-USD) miners, “the name of the game will continue to be survival,” Bendiksen argued, as some miners like Greenidge (GREE) and Stronghold Digital Mining (NASDAQ: SDIG) are in the middle of debt restructuring. Still, others such as Core Scientific ( OTCPK:CORZQ ) have filed for bankruptcy protection. “In the halving, I think it’s going to be all about reducing the dispersion costs and making sure the liabilities don’t come due in the time after that.”
And in an effort to raise cash, cover expenses and improve margins, some miners continued to release some of their bitcoin (BTC-USD) holdings. Rebellion Platforms (NASDAQ: UNREST), for example, said he sold 700 BTC during January for a profit of about $13.7 million.
“This obviously has a compounding effect on the market’s decline and increases volatility,” he said. “It kind of just makes everything worse.”
Knox Ridley, a sought-after contributor to Alpha, provided a multiplex analysis of bitcoin (BTC-USD) signaling the potential for a larger trend reversal.
|Society||Ticker||Type||January (2023)||December (2022)||M/M % Change||November (2022)|
|Digital marathon||(NASDAQ: MARA)||mined bitcoins||687||475||44.6%||472||544.7|
|Bitfarms||(NASDAQ: BITF)||mined bitcoins||486||496||-2.0%||453||478.3|
|scattering rate (EH/s)||4.7||4.5||4.4%||4.4||4.5|
|Riot platforms||(REBELLION)||mined bitcoins||740||659||12.3%||521||640.0|
|scattering rate (EH/s)||9.3||9.7||-4.1%||7.7||8.9|
|CleanSpark||(NASDAQ: CLSK)||mined bitcoins||697||464||50.2%||535||565.3|
|scattering rate (EH/s)||6.6||6.2||6.5%||5.5||6.1|
|HIVE Blockchain||(NASDAQ: HIVE)||mined bitcoins||260||213.8||21.6%||264||245.9|
|scattering rate (EH/s)||2.68||2.06||30.1%||2.31||2.4|
|Core Scientific||(OTCPK:CORZQ)||mined bitcoins||1527||1435||6.4%||1356||1439.3|
|scattering rate (EH/s)||17||15.7||8.3%||15.4||16.0|
|Argo Blockchain||(NASDAQ: ARBK)||mined bitcoins||168||147||14.3%||198||171.0|
|scattering rate (EH/s)||2.5||2.5||0.0%||2.5||2.5|
|Iris energy||(NASDAQ: IREN)||mined bitcoins||172||123||39.8%||151||148.7|
|TeraWulf||(NASDAQ: WULF)||mined bitcoins||157||125||25.6%||134||138.7|
|scattering rate (EH/s)||2||2||0.0%||2||2.0|
|Average bitcoins mined||543.8||459.8||18.3%||453.8||485.8|
|Average scattering rate||6.40||6.09||5.0%||5.69||6.1|