After a long, chilly crypto winter, struggling bitcoin miners are now enjoying the warmth of spring.
The cryptocurrency's surge to above $30,000 this year, which worked in concert with lowering electricity prices to enhance their profitability, has provided a lifeline to the power-hungry businesses that continually pump new bitcoin into circulation.
According to data from Blockchain.com, the 30-day average of mining revenue has increased to $27.34 million per day, the highest amount since last June.
For most of the second half of 2022, revenues were stuck between $15 million and $21 million, making it difficult for miners to pay off high debt loads. However, they are still far below the peak of $61.2 million reached in November 2021.
"Many public miners were on the brink of bankruptcy at the end of last year. At the current bitcoin price, these companies' cash flows have substantially improved and most of them should have no problem paying their obligations," said Jaran Mellerud, analyst at bitcoin mining services company Luxor.
Mellerud noted that many businesses have reorganized and paid down debt during the previous three months, and that debt-to-equity ratios for miners today appear to be substantially stronger.
For instance, Greenidge Generation Holdings' (GREE.O) debt-to-equity ratio has decreased from 11.7 to 5.8 since the beginning of this year, while Marathon Digital Holdings' has decreased from 2 to 0.5.
Investors have started to return to publicly traded cryptocurrency mining businesses as the spring thaw has taken hold. Among the major players, Marathon and Riot Platforms have seen their share prices more than triple this year, while the Valkyrie Bitcoin Miners ETF has increased by 162% and Greenidge has increased by 137%. But since early 2022, they have all continued to lose money.
A network of computers uses bitcoin mining to verify a block of transactions on the blockchain. When a block is successfully completed, miners are paid with bitcoin. They compete against one another by using computational devices that consume a lot of energy to solve complex mathematical problems.
According to researchers at BTIG, the cost of electricity to produce one bitcoin has decreased by around 40% from the end of last year as a result of falling power rates, especially in the U.S.
Accordingly, the 30-day average cost-per-transaction for miners has decreased to its lowest level since September, according to Blockchain.com data, despite both the network's computing capacity and the mining difficulty steadily rising to new all-time highs, which implies that it should require more power to mine one block.
However, miners shouldn't relax too much because their success depends on the erratic price movement of bitcoin.
"If we see bitcoin top out and consolidate, the run-up in miners may do the same, we expect to see more volatility as we head into summer," said Kevin Kelly, head of research at Delphi
Digital, although he sees a favorable environment for crypto persisting through 2023, compared with last year.
Despite improvements in their balance sheets, many miners are still struggling and have a lot of debt to pay off, according to Mellerud of Luxor.
"The bitcoin price increase has bought these companies time, but it would be detrimental for these companies if it were to fall back down to $20,000," he said.
According to BTIG, the majority of businesses are prioritizing debt reduction above investing in new machinery, despite the fact that the expected cost of new mining rigs has decreased by almost 69% since the end of 2021.
There are some exceptions, though. For instance, CleanSpark bought 45,000 new mining rigs to nearly double its computing power by taking advantage of lowering pricing.
A sudden increase in power costs or a sharp decline in the value of bitcoin might start a fresh cold snap. But for the time being, the sun is shining.
"I don't think we're completely out of the woods, but I think the worst is behind us," said Marcus Sotiriou, analyst at digital asset broker GlobalBlock.
(Source:www.usnews.com)
The cryptocurrency's surge to above $30,000 this year, which worked in concert with lowering electricity prices to enhance their profitability, has provided a lifeline to the power-hungry businesses that continually pump new bitcoin into circulation.
According to data from Blockchain.com, the 30-day average of mining revenue has increased to $27.34 million per day, the highest amount since last June.
For most of the second half of 2022, revenues were stuck between $15 million and $21 million, making it difficult for miners to pay off high debt loads. However, they are still far below the peak of $61.2 million reached in November 2021.
"Many public miners were on the brink of bankruptcy at the end of last year. At the current bitcoin price, these companies' cash flows have substantially improved and most of them should have no problem paying their obligations," said Jaran Mellerud, analyst at bitcoin mining services company Luxor.
Mellerud noted that many businesses have reorganized and paid down debt during the previous three months, and that debt-to-equity ratios for miners today appear to be substantially stronger.
For instance, Greenidge Generation Holdings' (GREE.O) debt-to-equity ratio has decreased from 11.7 to 5.8 since the beginning of this year, while Marathon Digital Holdings' has decreased from 2 to 0.5.
Investors have started to return to publicly traded cryptocurrency mining businesses as the spring thaw has taken hold. Among the major players, Marathon and Riot Platforms have seen their share prices more than triple this year, while the Valkyrie Bitcoin Miners ETF has increased by 162% and Greenidge has increased by 137%. But since early 2022, they have all continued to lose money.
A network of computers uses bitcoin mining to verify a block of transactions on the blockchain. When a block is successfully completed, miners are paid with bitcoin. They compete against one another by using computational devices that consume a lot of energy to solve complex mathematical problems.
According to researchers at BTIG, the cost of electricity to produce one bitcoin has decreased by around 40% from the end of last year as a result of falling power rates, especially in the U.S.
Accordingly, the 30-day average cost-per-transaction for miners has decreased to its lowest level since September, according to Blockchain.com data, despite both the network's computing capacity and the mining difficulty steadily rising to new all-time highs, which implies that it should require more power to mine one block.
However, miners shouldn't relax too much because their success depends on the erratic price movement of bitcoin.
"If we see bitcoin top out and consolidate, the run-up in miners may do the same, we expect to see more volatility as we head into summer," said Kevin Kelly, head of research at Delphi
Digital, although he sees a favorable environment for crypto persisting through 2023, compared with last year.
Despite improvements in their balance sheets, many miners are still struggling and have a lot of debt to pay off, according to Mellerud of Luxor.
"The bitcoin price increase has bought these companies time, but it would be detrimental for these companies if it were to fall back down to $20,000," he said.
According to BTIG, the majority of businesses are prioritizing debt reduction above investing in new machinery, despite the fact that the expected cost of new mining rigs has decreased by almost 69% since the end of 2021.
There are some exceptions, though. For instance, CleanSpark bought 45,000 new mining rigs to nearly double its computing power by taking advantage of lowering pricing.
A sudden increase in power costs or a sharp decline in the value of bitcoin might start a fresh cold snap. But for the time being, the sun is shining.
"I don't think we're completely out of the woods, but I think the worst is behind us," said Marcus Sotiriou, analyst at digital asset broker GlobalBlock.
(Source:www.usnews.com)
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