A combination of rising electricity rates, deteriorating stocks in the case of publicly traded companies and shrinking margins has seen most Bitcoin mining companies walk away from 2022 with at least minor bruises. In context, mining revenues fell by 37.50% to $9.55 billion from $15.3 billion in 2021. Ill-prepared public miners suffered major setbacks in the market and abroad throughout the year, resulting in executive resignations, bankruptcy filings and even lawsuits for reasons ranging from non-payment of debt to breach of contract.
Entering a new chapter in 2023, casual observers and industry experts who have commented on the expected outcome agree that more miners may go offline because the worst is not yet over. So far, billable miners like Northern Data have continued to operate from a strong financial position, but fewer are expected to top it by the end of this market cycle. However, there is still ample reason to move beyond the humiliating mining economy. In particular, Bitcoin’s prevailing high hash rate is a positive indicator that the network is healthy.
The hash rate of the Bitcoin network. Source: Ycharts
The average hash rate has increased almost steadily over the past year, against a contrasting result from the bitcoin market. The chart above shows that miners are still active in producing new blocks and as long as market participants are concerned.
Bitcoin mining difficulty adjusts downwards by 3.6%
The most recent adjustment to block height 770,112 provided a 3.6% decrease in mining difficulty after a 3.27% increase in the previous difficulty adjustment on December 19.
Mining difficulty graph. Source: BTC.com
The 34.09 trillion hard-read fall on January 3 was quite expected. Some were US miners they were forced to disconnect their units from the network towards the end of last month due to several reasons including inclement weather (winter storm), lack of cash and a sharp drop in profitability.
Still, the current number is almost 40% higher than the reading difficulty of about a year ago – 24.37 trillion on January 8, 2022. According to BitInfoCharts, at the time of writing, mining profitability is around $0.065 per terrahash per second, roughly a quarter of that figure. it was a year ago.
Mining profitability chart. Source: BitInfoCharts
This lack of profitability, coupled with the increased cost of production, has resulted in a drop in the price of hash.
Hash price index chart. Source: Luxor Technologies
While the factors causing current stress vary from firm to firm, most sick miners have poor expansion strategies in common.
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Poor treasury management besieges more miners
Compute North, which has racked up $500 million in unpaid expenses to at least 200 creditors, filed for bankruptcy in September 2022. Although the company had already shown signs of taking this path months ago, the announcement shocked the industry for the Minnesota-based firm. it completed a $385 million increase in February alone. Core Scientific, which said it was in dire financial straits in October, also filed for bankruptcy protection in time for the holiday season.
According to Bloomberg, Marathon Digital, another miner, had an exposure to Compute North worth about $80 million. The exposure to the Nevada-based miner has so far been mild and not a source of concern, but the figure in question is enough to place it. [Marathon] About miners at risk with Argo Blockchain. The latter is barely afloat after being bailed out of more financial distress by Galaxy Digital, which offered a $100 million equity package, including $65 million in the acquisition of the former Argo’s Texas-based Helios plant.
Resignations of a number of Bitcoin mining managers
The series of disasters witnessed over the past year have had an impact beyond mining, affecting credit services such as Celsi, which collapsed as it took a step toward going public. Celsius is involved in ongoing litigation over its hosting contract with miner Core Scientific. On Tuesday, the mining company announced plans to decommission its former mining rigs (more than 37,000 machines). Core Scientific noted that the arrangement received the green light from the bankrupt crypto-lending firm and will save $2 million in revenue per month.
Personnel changes were also observed in the industry. Compute North CEO Dave Perrill stepped down as CEO a month before the company’s collapse. Prior to this, Compass Mining’s Whitney Gibbs resigned in July, while Jeffrey Kirt stepped down from his role at Greenidge Generation in early October 2022. Bitfarms co-founder and CEO Emiliano Grodzki recently announced his departure from the Canadian miner. less than a week before the end of last year.
Bitfarms will mine 50% more in 2022 than in 2021
In its year-end operational update published on Tuesday, Bitfarms said it mined 496 BTC last month, a significant increase from 363 in December 2021. The publicly listed firm recorded a Bitcoin amount of 5,167 BTC, up 49.6% from 3,453 BTC in 2022. It was reported in 2021.
” During the month of December, we mined an average of 16.0 BTC per day. On the month we deployed new miners and accelerated our least efficient miners. This improved their efficiency by 15%, resulting in a reduction in energy consumption of approximately 4 MW. Bitfarms Chief Mining Officer Ben Gagnon commented on the numbers.
Outlining the company’s next steps, CEO Geoff Morphy said the company is ahead of schedule in its Canadian expansion target.
Stronghold Digital swaps $17.9 million in debt for preferred stock
Stronghold Digital, which has been actively reducing debt since the summer, has resumed dealmaking, revealing in an SEC filing Tuesday that it has agreed with noteholders to swap $17.9 million in convertible debt for $23.1 million in convertible preferred stock. The terms of this transaction provide for the cancellation of one-tenth of the convertible notes in exchange for convertible preferred stock. A common stock price of $0.40 per share will apply to the new Series C preferred stock that converts to common stock.
“We accept a substantial number of shares of common stock that may be issued […] however, we believe this is necessary to preserve cash, reduce our financial liabilities, and better position the Company to survive a potentially prolonged downturn in the cryptocurrency market.” CEO Greg Beard said.
The deal, which is expected to be sealed on February 20, adds to Stronghold Digital’s efforts to improve its books after announcing in August an arrangement to return 26,200 mining rigs loaned to NYDIG, clearing $67.4 million in debt in the process. Earlier this summer, the mining company shifted the core of its business from mining to selling energy from its pair of waste coal plants. It also canceled its hosting contract with Northern Data in September to improve cash flow. The recent decision to hold cash is projected to help reduce its outstanding debt below $55 million.
Compass Mining wins $1.5 million lawsuit against hosting provider
Compass Mining’s lawsuit filed in June 2022 against hosting firm Dynamics Mining came to a brief conclusion last Thursday after Delaware Court of Chancery Judge J. Travis Laster ruled in favor of the former. The dispute between the two companies began earlier in the day after Compass Mining took legal action Because Dynamics Mining cannot provide services as stated in their hosting agreement.
“We demand a high level of integrity and honesty from our hosting providers and will aggressively protect our customers when their interests are threatened.” Compass CEO Thomas Heller noted in a December 30 (Friday) blog post.
In other news, Bitcoin mining giant Riot Blockchain announced a rebrand to the Riot Platform on Tuesday — which CEO Jason Lessin said will help showcase its “increasingly diversified business operations” outside of mining. Lex explained in a Jan. 3 statement that the company has expanded the scope and scale of its Bitcoin-centric operations, so it had to drop the “blockchain” label.
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