With the arrival of cryptocurrency winter, one sector in particular is aggravating the difficulties: that of miners. Large blockchains such as Bitcoin, which operate under the “Proof-of-work” rule, require transactions to be permanently validated by complex cryptographic operations. The Bitcoin (or other cryptocurrency) they earn in exchange is generated from the commissions paid by users during each transaction, and rewarded in the form of a new block, i.e. cold and stumbling crypto introduced by the system according to a preset algorithm.
To understand how a miner generates profits, you also need to take into account the notion of difficulty, which depends on the number of blocks remaining to be mined and the number of competing miners. In parallel with their activity, miners must be able to generate a profit by taking into account energy costs, depreciation of equipment and any future capacity needs. It is also necessary to know how to prepare for market inflections and reversals, such as the one that has hit the sector since the beginning of the year.
Bitcoin miners did not all prepare equally for “winter”
However, as the Financial Times reports, many miners are starting to take the hit, especially on the Bitcoin blockchain, with what appear to be real transformations in the sector. The overall hashrate of the Bitcoin blockchain would therefore have fallen by 4% since the beginning of last week. At the same time, the total turnover reached its lowest level in almost a year. The industry has some publicly traded companies.
We can mention Marathon Digital, Hut 8 or Argo Blockchain… the value of the shares of these companies has been in free fall for just over a month, between -30% and -40%. It must be said that between a drop in interest, a shift of investors to other cryptocurrencies 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 the last years.
But it is above all the international context that complicates the affair. In recent years, most of the major mining operators have put hundreds of millions of dollars on the table to improve their infrastructure, in particular to make it much less energy-intensive and therefore more easily find the way to profitability. At the top was the war in Ukraine and the consequences we know on the price of energy.
And a tightening of the banking sector and markets that limit investment capacities. According to the business newspaper, the situation could herald a future wave of consolidation. Some actors appear to have prepared for the crisis better than others. Hut 8, for example, has been predicting a turnaround for a year and has a war chest of 7,078 Bitcoins to use at will for possible acquisitions.