How to make money on the bad news: why mining is dying and what we have to do about it

According to The Wall Street Journal, today’s mining industry (mainly Bitcoin and PoW) is in its deepest crisis. According to the newspaper, many companies are selling BTC miners at a discount of more than 70%, wanting to get out of chronically unprofitable business at any cost.

 

What is happening to mining right now?

We have previously written (source 1, source 2) about a dangerous situation in mining — on the one hand, the difficulty of the network (hash rate) is steadily growing, on the other hand, the price of Bitcoin is not increasing to cover the growing costs.

According to recent data from The Wall Street Journal, mining companies are forced to sell off their cryptocurrency mining equipment en masse to cover the growing losses. So ASIC miners with 100 TH/s capacity now cost about $24 (last year their average price was $106), and the discount thus reaches 77%.

Some firms are forced to get rid of the equipment they have just received. For example, at the end of October, Argo Blockchain said it would sell 3,843 new machines. 

The stock price of Core Scientific, one of the world’s largest mining companies, has plummeted 99% since the beginning of the year. TeraWulf has lost 93% of its capitalization since the beginning of the year. Stronghold Digital Mining shares fell 94% and Riot Blockchain shares fell 74%.

Speaking more about the latter company — Riot Blockchain’s latest earnings report came out yesterday. This major British mining corporation posted a net loss of $36.6 million in the past three months. Despite Riot Blockchain management’s efforts to cut operating costs, this figure is almost double last year’s Q3 results of $15.3 million.

There is nowhere to run — the contradictions are growing

The bet on the additional issue of shares did not justify itself due to the reduction in the capitalization of the leading miners from 70% to 94%. Now, they are desperately selling off their equipment. In the case of Argo Blockchain, even new machines just received from the factory were put up for sale. This collapses this market even more. 

It is a strange situation — you can buy a miner on the market for much cheaper than it is sold by the miner’s manufacturer. Because of this dumping, sales are falling in this related sector of microelectronics manufacturers. Many of the miner manufacturers are now in dire need of operating finance themselves, having lost investors and buyers at the same time.

A dangerous contradiction remains — mining and the Bitcoin network itself do not seem to be suffering from this growing bankruptcy of the mining business. The difficulty of mining remains at its peak — after another recalculation, the figure has adjusted by a paltry 0.2%. 

This situation clearly needs to be resolved somehow, it is unlikely to be a pleasant experience for the crypto market.