In the wake of arguably the worst crypto market downturn in the industry's short history, miners Riot Blockchain (NASDAQ:RIOT), Core Scientific (NASDAQ:CORZ) and Bitfarms (NASDAQ:BITF) have been forced to sell a portion of their bitcoin (BTC-USD) stakes in a bid to free up capital.
That comes as crypto miners’ performance metrics in aggregate have weakened somewhat again in June, as the number of bitcoins (BTC-USD) mined edged down 1.8% on average, though mining capacity as measured by the hash rate jumped 8.8%, according to the table below.
As miners face tanking crypto prices, rising energy prices as well as heightened competition, Riot Blockchain (RIOT), for example, not only saw its bitcoin (BTC-USD) mining and hash rate growth decline M/M in June, but it also sold 300 bitcoins for net proceeds of approximately $6.2M to help cover operational costs, namely the development of its Whinstone facility in Rockdale, Texas. Still, the company holds over 22x that amount of BTC.
Nevertheless, “it’s still important to us to have a strong bitcoin balance sheet, so we haven’t sold from the balance sheet per se,” Riot CEO Jason Les told Blockworks on July 14, adding that “There’s not a strict framework or policy around that. It’s a decision we are evaluating on a monthly basis.”
SA contributor Dilantha De Silva, who started coverage on Riot (RIOT) with a Strong Sell rating towards the end of June, believes the company cannot “make sustainable profits and reiterate that it is a highly volatile business that is strongly reliant on fluctuating Bitcoin prices.”
For Core Scientific (CORZ), which produces the most amount of BTC among its peers, it got rid of a whopping 7,202 bitcoins (BTC-USD) last month at an average price of approximately $23K per token for total proceeds of ~$167M. Those profits were used to pay for ASIC servers, capital investments in additional data center capacity as well as scheduled repayment of debt. Take a look at why SA contributor Made Easy - Finance views the stock as a Hold.
Over the course of June, the price of bitcoin (BTC-USD) has nosedived over 33% as the financial contagion effect in the crypto market triggered by the collapse of crypto exchange Celsius and crypto-focused hedge fund Three Arrows Capital keeps spreading. It comes at no surprise that crypto miners, most of whom cited poor market conditions in recent months, experienced similar drawdowns at the time, as per this chart.
The $1T question on most people’s minds is where does the price of bitcoin (BTC-USD) go from here? One way to look at the matter is the token’s cost of production which has dropped to around $13K from about $24K at the beginning of June, J.P. Morgan analyst Nikolaos Panigirtzoglou wrote in a note to clients on July 13. The slump in bitcoin production costs come as BTC miners try to protect their profitability by deploying additional mining rigs and hence mining efficiency is on the rise in a move that could be a negative for BTC prices going forward, he added.
The falling production cost has been driven primarily from “the decline in electricity use as proxied by the Cambridge Bitcoin Electricity Consumption Index, while the hash rate has been fluctuating in recent months with no clear downtrend,” Panigirtzoglou explained.
“While clearly helping miners’ profitability and potentially reducing pressures on miners to sell Bitcoin holdings to raise liquidity or for deleveraging, the decline in the production cost might be perceived as negative for the Bitcoin price outlook going forward,” Panigirtzoglou noted. “The production cost is perceived by some market participants as the lower bound of the Bitcoin’s price range in a bear market.”
Previously, (June 11) Marathon Digital, Riot Blockchain bitcoin mining growth softened the most in May.
|Marathon Digital||(MARA)||bitcoins mined||140.1||268||299||235.7|
|hash rate (EH/s)||3.6||3.4||3.3||3.4|
|HIVE Blockchain||(HIVE)||bitcoins mined||278.5||273.4||268.8||273.6|
|hash rate (EH/s)||2.17||2.18||2.15||2.2|
|Riot Blockchain||(RIOT)||bitcoins mined||421||466||508||465.0|
|hash rate (EH/s)||4.4||4.6||4.7||4.6|
|hash rate (EH/s)||2.8||2.5||2.4||2.6|
|Hut 8 Mining||(HUT)||bitcoins mined||328||309||309||315.3|
|hash rate (EH/s)||2.78||2.64||2.58||2.7|
|Core Scientific||(CORZ)||bitcoins mined||1106||1138||1121||1121.7|
|hash rate (EH/s)||10.3||9.2||8.9||9.5|
|Argo Blockchain||(ARBK)||bitcoins mined||179||124||166||156.3|
|Greenidge Generation||(GREE)||bitcoins mined||230||195||197||207.3|
|hash rate (EH/s)||2.5||1.7||1.6||1.9|
|Average bitcoins mined||348.8||355.5||362.5|
|Average hash rate||4.08||3.75||3.66|