Bitcoin miners are finding it no longer profitable for BTC. Rising energy prices, inflation and an impending recession have put many of these companies under pressure.
Bitcoin mining has become an increasingly difficult task as crypto miners can no longer afford it. As a result, the network’s hash rate is expected to fall as miners simply cannot make a profit, let alone recover the cost.
Over the past few months, many bitcoin miners have experienced a number of financial stresses. These include Core Scientific, Argo, Compute North and Iris Energy.
Meanwhile, Luxxfolio recently offered an operations update explaining the pressure from the mining industry. The miner highlighted that it was unprofitable, although it had reduced its debt and moved to low-cost immersive mining. Most notably, it said that if it did not find any partners or purchases for its mining operations in New Mexico, it would have to consider closing operations permanently.
Iris Energy is also under high levels of pressure. Its financial update also revealed a dire situation, saying,
“Certain equipment owned by special purpose vehicles (i.e., bitcoin miners) currently produces insufficient cash flow to meet their respective debt financing obligations, and has a current market value below the principal amount of the relevant loan. The lender Discussions on restructuring are on with.
These conditions represent what the larger mining industry is going through. Investors are concerned about the decrease in the hash rate.
BTC hash rate could be suffering
Both difficulty and hash rate reached all-time highs in October. This was seen as good news, as a higher hash rate meant a more secure network. However, the situation has changed rapidly.
As bitcoin mining is no longer profitable enough, there could be more shutdowns on the horizon. It currently costs around $19,300 to mine 1 BTC, and in the current economic environment, this is not possible.
Energy prices have also risen in 2022, and this has also contributed greatly to the downturn in the mining industry. Inflation and the ensuing global recession are also playing a part.
Bitcoin mining stocks are seeing a huge drop
Meanwhile, the shares of bitcoin mining companies are seeing a strong jump. Hut8 is down 73% year-over-year (YTD), while Canaan is down 44%. Other big drops include Bitfarms 82%, Riot Blockchain 73% and Hive 77% YTD. Same is the case with Argo blockchain, which is down by 90%.
The drop in stock prices across the region clearly shows how the bear market is affecting large bitcoin miners.
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