Public Bitcoin Miners’ Hash Rate Booms – But Is It Actually Bearish For BTC Price?
The public miners’ share of the Bitcoin (BTC) network could grow to 40% by mid-2023, according to a new report from Hashrate Index. But this could bring more stress to an already bearish BTC market.
Public Bitcoin miners’ hash rate jumps 295% in a year
The outlook emerged after assessing the hash rate of Core Scientific, Marathon Digital Holdings, Riot Blockchain and other public miners over the past 12 months. Notably, these firms increased their hashing capacity to 58 EH/sa in October 2022 from 15 EH/sa a year ago – up 295%.
In comparison, the private miners’ Bitcoin hash rate increased from 134 EH/s to 177 EH/si in the same period — 58% growth.
“The driver for the public miners’ rapid capacity increases is that they could access cheap capital during the 2021 bull market,” explained Jaran Mellerud, a Bitcoin mining analyst and author of the Hashrate Index report.
He adds that public miners used the money to buy massive mining rigs. As a result, these firms have tens of thousands of Bitcoin mining rigs in storage, waiting to be connected, while they await deliveries of more rigs.
Core Scientific – the largest public #bitcoin miner – has a share of 5% of the total hashrate. Marathon and Riot follow, each controlling over 2% of Bitcoin’s hashrate.
In total, there are seven public bitcoin miners with a hash rate share of more than 1%. pic.twitter.com/ZnwsFjvQcy
— Jaran Mellerud (@JMellerud) 24 October 2022
Thus, the Bitcoin hash rate generated by public miners can continue to increase significantly as more and more new machines come online.
On the other hand, private miners could not access the capital to buy mining rigs. So their hash rate contribution growth may remain slower in comparison, argues Mellerud.
Stressed miners can increase the risk of selling Bitcoin
But in 2022, Bitcoin miners have generally been hit by falling BTC prices, rising energy costs, regulations and increasing competition. Public mining companies have rushed to raise capital by issuing additional shares or by taking on more debt, resulting in massive falls in their share prices.
For example, the Valkyrie Bitcoin Miners ETF (WGMI), which tracks several major public miners, has plunged 75% since its launch in February.
Another unpopular option to raise capital is to sell Bitcoin at lower prices. For example, Core Scientific has dumped 85% of its Bitcoin holdings since the end of March, according to its August update.
Related: Kazakhstan among top 3 Bitcoin mining destinations after US and China
During the same period, BTC’s price drop was 60% to around $19,500 per token. In other words, an increasing hash rate can increase miners’ need to sell Bitcoin for cash to keep operations going.
“It’s an absolute carnage,” wrote Marty Bent, founder of Bitcoin media company TFTC, adds:
“Bitcoin miners are in a world of hurt right now, and the likely outcome is a wave of failures in the coming months as the hashrate continues to pump, the price remains flat, and energy prices continue to rise.”
Meanwhile, Mellerud says many public miners will not be able to handle a drop in cash flows, resulting in bankruptcies. As a result, their mining rigs could be auctioned off to private miners.
Conversely, public miners’ decision to increase capacity could pay off if the Bitcoin price undergoes a decisive bullish reversal. As Cointelegraph reported, signs of a potential market bottom are already emerging, which will provide relief to miners struggling with today’s prices.
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