The Financial Times reports on the dizzying fall in revenues of companies specializing in the mining of cryptocurrencies including Bitcoin.
As the crypto winter sets in, one sector in particular is deepening the difficulties: that of miners. Large blockchains such as Bitcoin that operate according to the "Proof-of-work" rule require the constant validation of transactions through complex cryptographic operations. The Bitcoin (or other crypto) they earn in return are generated by the fees paid by users during each transaction, and remunerated in the form of a new block, in other words crypto ringing and stumbling introduced by the system according to a pre-established algorithm.
To understand how a miner generates profits, we must also take into account the notion of difficulty – which depends on the number of blocks remaining to be mined and the number of miners competing. In addition to their activity, miners must be able to generate a profit by taking into account energy costs, depreciation of equipment and possible future capacity needs. It is also necessary to be able to prepare for market inflections and reversals, such as the one that has been hitting the sector since the beginning of the year.
Bitcoin miners have not all prepared themselves the same for "winter"
However, as reported by the Financial Times, many miners are starting to blame the blow, especially on the Bitcoin blockchain, with the key to what looks like real transformations of the sector. The overall hashrate of the Bitcoin blockchain has reportedly fallen by 4% since the beginning of last week. At the same time, total turnover reached its lowest level in almost a year. The sector has a few companies listed on the stock exchange.
We can mention Marathon Digital, Hut 8 or Argo Blockchain… the share value of these firms has been in free fall for a little over a month, between -30% and -40%. It must be said that between a drop in interest, a shift of investors to other crypto and other types of investments, and a value that has lost more than 50% this year, the Bitcoin blockchain has rarely been so unattractive in recent years.
But it is above all the international context that complicates the situation. Most of the major mining players had, in recent years, put hundreds of millions of dollars on the table to improve their infrastructure, including making it much less energy-intensive and thus more easily finding the way to profitability. The top has been added to the war in Ukraine and the consequences that we know on the price of energy.
And a stiffening of the banking sector and markets that limit investment capacity. According to the business newspaper, the situation could presage a future wave of consolidations. Some actors seem to have prepared better for the crisis than others. Hut 8, for example, had anticipated a turnaround for a year – and has a war chest of 7,078 Bitcoin to use as it pleases for possible acquisitions.