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Bitcoin miners are losing income

Bitcoin miners are in a difficult situation. A review by a Bitcoin mixer: mixer.money
Bitcoin miners are losing income

  1. Hashrate is going up
  2. Why does hashrate continue to rise?
  3. Prospects for bitcoin mining
  4. Types of mining in 2022
  5. Conclusion

The bitcoin miners have had a difficult year, and so far there is no hope to change the situation for the better. Energy prices have risen sharply, respectively, as have the miners’ expenses. According to the US Bureau of Labor Statistics, electricity prices in the US in August rose the most since 1981, increasing by 15.8% year on year. And that is the pattern seen almost everywhere else in the world.

Electricity prices in the US have increased by 15..8% year on year

At the same time, the price of bitcoin has fallen nearly 60% since the beginning of the year, which has led to lower profits for miners. Now they invest more and get less.

Hashrate is going up

Additionally, bitcoin’s hash rate, or the total processing power that secures the network, has reached an all-time high. It means that bitcoin mining complexity, which automatically adjusts about every two weeks based on the hash rate, will increase.

According to the estimates of Braiins, a Bitcoin mining company, on October 10, miners will be preparing for the biggest increase in complexity since May 2021.

Arcane Research analysts report that, on average, miners’ revenues are down 81% from their peak in October 2021. Most public miners’ gross margins have fallen to 30% -40% from 80% -90%, according to Arcane analysts.

Compute North, one of the major data center operators for crypto miners, filed for bankruptcy in September. The company took steps “to stabilize its business and implement a comprehensive restructuring process,” a Compute North spokesperson told MarketWatch.

Why does hashrate continue to rise?

In 2021, as bitcoin prices kept rising and the Federal Reserve maintained its lax monetary policy, “a lot of miners levered up,” said Sami Kassab, an analyst at Messari. He added that “the public miners wanted to compete with others and started raising capital and equity.”.

In order to expand their operations, bitcoin miners have ordered machines worth billions of dollars. “A lot of these purchase orders were set last year and because of supply chain issues, they’re just starting to arrive to miners now,” noted Kassab.

As miners sought to keep working as well as meet debt obligations, they tapped into the new machines, contributing to hash capacity growth.

Prospects for bitcoin mining

If the price of bitcoin falls below $17,600 and stays at that level for an extended period of time, miners will face additional pressure, Kassab warned.

“You’ll have some of the weaker miners go bankrupt, and they might have to sell their machines to some of the stronger miners,” Kassab said. Even stronger miners will come under pressure, “and most likely, they’ll just have to keep selling bitcoin held on their balance sheet in order to finance their operations,” he added.

There is also the view that bitcoin prices are already at a level where bitcoin miners will be forced to consolidate. Some may merge, or investors may emerge to acquire multiple companies or make some public companies private.

In September, Bitdeer, a bitcoin mining company owned by the crypto billionaire Jihan Wu, created a $250 million fund to buy distressed assets from other miners, Bloomberg reported.

Types of mining in 2022

Cryptocurrency can be mined in different ways.

Solo bitcoin mining became unprofitable back in 2013, as it implies a lone miner with his own equipment. Now it is very, very expensive to build a farm sufficient for bitcoin hash rate.

Solo bitcoin mining. A review by a Bitcoin mixer: mixer.money

A pool of miners – the pooling of computing power of many people – looks more promising. But the income in that case is divided between all. However, by becoming a member of a pool, you have a much better chance of making money than a single person.

A pool of miners — the income is divided between all

Cloud mining involves paying to rent a hash rate or even equipment. Among the upsides are the lack of problems with installing equipment at home (noise) and paying for electricity, but a large number of scam projects have contributed to a distrust of cloud mining. Scammers just draw the interface of the program, while in reality nothing happens.

Cloud mining. A review by a Bitcoin mixer: mixer.money

Conclusion

Bitcoin miners are indeed in for hard times. Unlike 2021, when even the highest investments paid off, now the payback period has increased significantly. All experts are unanimous that 2022 is not the best time to start mining. But there is no hurry to sell your farms, either. There is always a chance that the situation will change for the better. This is what has happened with bitcoin many times before.


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