Is it profitable to mine during a bear market?
by Maryna Trifonova, Head of Content at Jax.Network
In 2021, we saw miners rolling in cash, as the price of Bitcoin hit a new all-time high of nearly $69k. Nowadays, most of them are getting kicked out of the game due to surging electricity prices and a prolonged bear market. Is there still anyone alive?
A major sell-off
Cryptocurrency mining is a huge business totaling over $4.40 billion in market capitalization for the top players only, according to companiesmarketcap.com. As crypto winter gets colder, with Bitcoin discovering new lows, mining revenues decrease and machines get cheaper correspondingly. To put into perspective, it costs around $24 to get a machine producing 100 terahashes now, while a year ago, the price for the same machine could go as high as $106. That’s over a 77% drop in value within a single year.
The explanation for such a massive liquidation is obvious. Once the mining operation stopped bringing substantial profits, companies, that often used profits to cover the debts they got for buying mining equipment during the bull run, couldn’t keep paying off the debts and had to sell their hardware in order to get quick cash. Thus, top industry companies report a major decline in their stock prices. For example, Hut 8 Mining Corp. is down 70%, Marathon Digital Holdings Inc. is down 67%, and Core Scientific plummeted 99% year-to-date.
A silver lining
While some miners start to panic-sell and look for a quick exit, others see it as a great opportunity to increase their market share. It has been reported that Grayscale, the largest BTC holder, plans to purchase Bitcoin mining equipment and offer investors a share of the profit. Bitdeer Technologies, a cloud mining service run by the founder of Bitmain, decided to take the same approach and started to raise investments of around $250 million with the purpose of buying mining equipment from distressed miners. Another prominent firm JKL Group also announced its plans to create a $50 million fund for exactly the same purpose.
However, it’s worth mentioning that if we take JPMorgan’s estimate of the average mining price of around $13k, Bitcoin mining can still be profitable for those miners, who don’t have any debts, have access to cheap electricity, and/or mine two or more coins simultaneously. Please note that our JaxPool provides not only a great merge-mining opportunity that increases your mining revenues but also offers the best terms of cooperation on the market right now, compared to other top mining pools.
Conclusion
While some mining companies try to wait out the storm in cash, others fill the void and buy as many machines as they can at a 77% discount. After all, the Bitcoin network hashrate and difficulty have been hitting new all-time highs, suggesting that most miners either haven’t hit the maximum pain level or expect a potential upward price movement for Bitcoin in the near future.
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