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Bitcoin mining

How the Lumerin Hashpower Marketplace can help Bitcoin miners navigate the bear market

Withstanding harsh market conditions is easier thanks to hashrate commoditization

The bear market is hitting miners where it hurts the most. Mining profitability has dropped to lows unseen since October 2020.

The macro context is poised for continued increases of electricity prices, large interest rate hikes, and a global recession. The outlook for the short-term future is dim, and treasury management is slowly becoming a matter of life and death for miners.

The situation is already escalating. Many miners who added debt to their balance sheets during the bull market to finance expansion of their operation are now looking for additional capital resources to fulfill their obligations.

Let’s look a little deeper into this scenario.

The challenges of bear-market mining

Mining involves directional risk. This means that loss arises from an exposure to the particular asset or assets of a market — in this case, bitcoin.

As a result, the sudden drop in bitcoin’s price has forced miners to reassess their strategy. Large miners are liquidating their BTC reserves, while some smaller organizations are looking to third parties for mergers and acquisitions to save their venture.

Additionally, limited options for proper hedging instruments make it more cumbersome to weather the storm. Currently, most involve liquidating or exposing their inventory to additional risk, such as giving up custody of their bitcoin to an institutional lender.

Most importantly, the lack of effective commoditization of hashrate — miners’ primary “product” — forces them to use their bitcoin earnings as a lifeline.

Indeed, with proper hashrate commoditization infrastructure, miners could hedge against risks using hashrate instead of earnings.

Hashpower contracts provide greater predictability

Enter the Lumerin Hashpower Marketplace: a decentralized application that enables the commoditization of miners’ produce — hashpower.

Within the marketplace, miners can effectively create contracts to sell hashpower like any other asset, setting the price, speed, and duration of the contract at their convenience.

The ability to reroute hashrate according to smart contract rules is revolutionary and opens up a wide range of possibilities for miners.

Photo by Dmitry Demidko on Unsplash

Self-financing

A miner can sell their hashrate at a premium in advance. This would enable them to source the necessary liquidity to fulfill their obligations without having to liquidate their mined bitcoin.

Hedging against profitability drops

Another use-case for commoditized hashpower is hedging against decreasing profitability. If a miner believes that hash price will continue to drop — whether it is due to price action or increasing difficulty — they can put up a contract for hashpower at a fixed price, mitigating the losses of such an event. Essentially, like hedging contracts for Bitcoin mining hashpower.

Peer-to-peer ASIC rentals

Whether it’s to acquire more hashrate or to lend it out for a fixed price, hashrate contracts grant miners enhanced flexibility and granular management over their operations. For example, if a miner wants to expand their hashrate but ASIC prices are soaring, they could buy a hashrate contract instead, saving most of their principal until prices drop.

Generally speaking, commoditized hashrate enables miners to add predictability and de-risk their operations, allowing them to plan and execute more solid strategies to navigate the bear market without compromising capital or sustainability.

This is only the beginning

The Lumerin Hashpower Marketplace aims to become an additional resource for miners, expanding their hedging options in the face of adverse conditions through hashrate commoditization.

However, as adoption grows, the platform will provide both miners and buyers with several advantages.

Indeed, demand for hashrate has always been limited by technical and budgetary barriers. The Lumerin Hashpower Marketplace will enable this retail demand to purchase hashrate and mine through their MetaMask wallet. No technical knowledge nor hardware acquisition is required.

In addition to the benefits already listed above, miners will find this new demand for their produce, allowing them to access a wider market and take advantage of new revenue opportunities.

That said, we believe the Lumerin Hashpower Marketplace will bring several long-sought resources to miners and transform the mining landscape into a more decentralized future.

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Lumerin Protocol

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Making crypto mining hashpower a tradeable commodity. Built by Titan Mining. Visit us on https://lumerin.io/.