How many bitcoin miners will survive the winter?

by James · October 20, 2022

The Bitcoin mining industry has shown serious signs of distress this summer, as miners were reported to have sold more bitcoin than they mined, taking heavy losses in the process. Since then, bitcoin’s price has not recovered as the all-bear market shows no sign of stopping against a backdrop of rising interest rates and war in Europe.

One of the hallmarks of this current downturn has been inflation, which was partly due to high energy prices, namely in oil and gas. In turn, exceptionally high electricity prices put more pressure on miners who have to contend with lower bitcoin prices.

Cambridge University’s latest figures show the average bitcoin mining cost just above the $19,100 mark. According to JPMorgan, what may have helped miners was more advanced hardware that made mining more efficient and kept bitcoin’s average mining price close to the market price.

JPMorgan’s estimate of the average mining price, using the most advanced mining rigs, is around $13,000. However, it is clear that the market does not think miners are doing too well under current conditions.

Hive Blockchain Technologies Ltd, a Canadian bitcoin mining company is down 74% year-to-date, slightly better than its Canadian counterpart Bitfarms, which is down 82%.

NASDAQ-listed Hut-8 Mining Corp is also down 74% YTD, Marathon Digital Holdings up 79%, Canaan Inc. 62%, Greenidge Generation Holdings 96%, BIT Digital 92%, NYSE-listed BIT Mining 97%, while UK- listed Argo Blockchain PLS is down 89%. NASDAQ also plans to delist Digihost, which is up 82% YTD if the stock price doesn’t recover.

Last week, Binance announced that it is issuing loans worth $500 million to miners with 5%-10% interest. Binance’s offer comes after Bitmain founder Jihan Wu Bitdeer set up a $250 million fund to buy distressed bitcoin miners. Bitmain is a major provider of bitcoin mining rigs.

Just another excessive player in the bitcoin mining space

One of the largest miners in the US is Texas-based Riot Blockchain, which is down 82% YTD and has a market cap of $948 million and around 6,775 bitcoin in its war chest.

It is also one of those favorite bitcoin-type stocks out there for wealthy individuals and institutional investors. Some of the most notable shareholders include Vanguard Group, which owns 7.18% of the company, BlackRock, which owns 4.83%, and Morgan Stanley, which owns 1.32% and has been one of the most active in crypto among US major banks .

Despite being a flagship bitcoin mining company, Riot Blockchain doesn’t seem to be making much money. During last year’s bull run, it made a net profit of just $26,867,000, and this year it has posted a staggering loss of $330,705,000. The secret sauce to Riot Blockchain’s survival appears to be share dilution.

As of last year, Riot’s outstanding shares increased from 86,501,471 to a whopping 130,405,502 (that’s 34%). Minus the stock, it also has around USD 147 million in debt. Some investors have also accused the company of pumping and dumping the stock.

Read more: Bitcoin mining protocol Stratum V2 opens for testing

Riot Blockchain may be saved with a booming bitcoin bull market pushing prices higher, but in the meantime the company is bleeding cash like there’s no tomorrow.

So, how many bitcoin miners do you think will make it through the winter? Let us know on Twitter.