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Prolonged bearish trend on crypto and falling the bitcoin course, On the one side, reduced miners' income, But on the other, they opened some opportunities. Enough to turn to statistics.
Risk and business
Unlike many other enterprises, organizations, which specialize in bitcoin mining, Able for a long time to exist in the "conditions of uncertainty". The income of market participants fall sharply, And sometimes they completely go into minus with the onset of prolonged cryptosim - descending trends in the market. Fasting companies are even worse. But, As statistics show, Not everything is so unambiguous.
In practice, "production of digital cash" is the acquisition, Placement and maintenance of computing power plus Search for a suitable electricity source to guarantee the functioning of the Bitcoin network through the procedure for confirming transactions. It is mining that is the basis of the decentralization of the system.
Investments in mining against investment in cryptocurrency
Investments in Bitcoin mining differ from the direct purchase of the asset. On the one side, When you invest in mining, You have a constant and predicted cash flow and physical assets (equipment), which can be implemented (albeit with a partial loss) In the most stressful moments in the market. Such investments will rather attract relatively careful people, who are used to investing in the company, capable of generating profits.
On the other side, Direct investments in cryptocurrency look more risky. Buying bitcoin or promising altcoins in long -term, You count on earnings only in the future, So you have no constant cash flow. Besides, Investing in bitcoins, you seem to "freeze money" in exclusively one asset. While buying mining equipment, you are not limited by prey only BTC. Suitable equipment can, For example, let any other cryptocurrency, made in a similar drifting algorithm (SHA-256 in the case of bitcoin).
At the moment, BTC is worth 65% cheaper, than at your peak in November 2021 of the year. At such moments, part of investors, Having evaluated all the risks, throws mining and switches to something else. But there are those, Who asks the question: “Isn't it the right time to start now?».
Bitcoin price and its production
All in all, Miner cash flows are reduced with a fall in the price of BTC. At first glance, it looks conventionally, that lower prices can give a mining company at least some advantages. Nonetheless, since we are talking about the industry in general, you need to pay attention not to the market price, and on, conditionally, The cost of generation of the final product, In our case - Bitcoin.
Among all the costs, which are included in the price of cryptocurrency, The largest is the price of electricity, without which the process of data processing in the blockchain is impossible. That, who can find a cheaper electricity source with equal performance, Get a competitive advantage. In some cases, he will be able to make profit even in adverse market conditions.
Since not all miners are able to achieve the same level of performance, In practice, this means one: Many will receive the final "cost of products", in terms of costs close to the market price of the asset. As a result, many will have to sell equipment, which does not pay off, and leave the market.
The secret lies in the nature of the crypto, which is largely closer to the stock, And commodity, And therefore "counter -cyclic". It means, that the time of falling is the best moment to expand your activities. There is an interesting relationship between the dynamics of mining equipment (eg, According to MineSpot co-founder Adam Aushev) With the price of BTC: first, usually, subject to greater correction, than the asset itself.
A little statistics: in 2022 year BTC price from April to August fell on 47%, At the same time, the cost of equipment during the same period decreased by 60%. A similar correlation was recorded on the portal
Hashrateindex: ASIC is lost in cost faster, What is the course of the basic asset..
Source:
Bitcoinmagazine.com with reference to Arthur Mining
Bitcoin mining companies
The modern mining industry can be compared with the early business on the network (cable) Infrastructure in the 1990s, at the dawn of the development of the Internet. The business cables have survived three cycles of "extensions and consolidation".
The first cycle was associated with the advent of technological enthusiasts and computer geeks, from which the business on the Internet has begun, which organized the first network infrastructures. You can say, It is thanks to these pioneers, Fanatics and enthusiasts, the network industry has become massive over time. Something similar happened to the first miners of Bitcoin in the distant 2009 year. Then the first cipher -pants, Cryptoanarchists and crypto enthusiasts supported the operability of the network, Often not even counting on any reward.
In the second cycle Players appeared, who saw new opportunities for earnings and decided to quickly increase their capital. This is a wave of first investors and entrepreneurs, which focused only on accelerating the expansion of their structures and short -term results.
And finally, In the third cycle We saw the consolidation of the entire industry. She was accompanied by the arrival of the players, which, on the one hand, paid attention to performance and long -term perspective, on the other, they were aimed at earnings. During the third wave, venture capital began to enter the market, And the industry has become professional. Already in 2010 year 50 the largest cable companies from the 1990s united in four organizations.
Most modern mining companies have already entered the second cycle, concentrating mainly on short -term results and without paying due attention to performance. This was reflected in companies of less, which are very vulnerable in stressful situations.
Halving
Positive investment expectations of many participants, certainly, associated with the deflation model of the emission of the first cryptocurrency, which is the result of a systematic reduction of the Bitcoin block of the block in the blockchain. About that, Is it really worth expecting BTC growth in the light of the next halving, And how in general Halving influenced BTC pricing - we said in a recent review.
But interesting, that many people who are unprofitable during the cryptosim period still come to an agreement with creditors., Bypassing bankruptcy. For example, Recent events with Greenidge Generation showed: Investors are ready to consider debt restructuring, Waiting, that the business will still make a profit in the future. And this is far from the first case in history, when a risky mining company attracts a lot of money for development.
During the bitcoin growth cycle between 2020 and 2021 for years, miners' income has grown proportionally. Then many public companies kept their money in Bitcoin to maximize profit. According to Luxor Technologies, Public mining companies borrowed from $3 to $4 billion, To finance the expansion of infrastructure and the purchase of equipment.
Products, When everything grows and sell, When everything falls
However, those same players made the following mistake: Usually for the manufacturer, which is able to increase the volume of production, It makes sense to sell then, What do you produce, and the money received reinvest. This is much more profitable, than to keep it, What do you produce on the balance. They did not take this into account and chose to keep a significant part of the accumulations in the extracted cryptocurrency during the growth of its value.
But since the price of bitcoin (As history shows) cannot grow up endlessly and is replaced by downward trends, Mineers, to pay off debts and loans, I had to reduce positions. As a result, this led to increased pressure from the bears in the market in June-July, and ended with new price minimums.
In fact, The result of the money management strategy, used by these mining companies, such: They mined, when it was expensive and sold, When it became cheap. As a result, this turned out to be huge financial losses, In addition to operational losses, caused by a decrease in bitcoin price.
So the least effective players, Firstly, cheaply got rid of cryptocurrencies from their balances, and secondly, in the case of bankruptcy, they cheaply implemented computing power on the residual principle, who once bought for a lot of money.
We have already talked about that, that in exceptional cases, the price of specialized mining equipment can fall even stronger than the course of the extracted cryptocurrency during cryptosim.
On the other side, More far -sighted and effective participants are just buying these assets in the consistent period of time. If they have enough money and investment reserves, To “wait out” the cryptosim to the next growth cycle - they are highly likely to “recoup” the redemption of equipment for mining from ruined participants. That's why we say, what for some cryptosim is a time of great possibilities.
The best time of opportunities
Why is it happening at all: Some miners are ruined, and others are in a winning position? Bitcoin mining is an unstable business. As a result, The ideal point for entering is the period, When the prices are low. At this time, the most short -sighted players are faced with problems and leave the market.
Of course, Now the equipment is very cheap. But for investment it is not enough to buy mining farm, you still need to calculate the profitability, payback, Service costs, repair, Electricity and content. Among other things, you need to study in advance all potentially profitable altcoins, made in a similar hash algorithm, to reconfigure equipment in time, If some coin loses its value.
Briefly speaking, you need to take into account a lot of factors. Then the miners will have the opportunity to survive the “cryptosim” cycle and increase their welfare with the onset of “cryptan”.