Due to the collapse of cryptocurrency prices, the increase in electricity tariffs and the decrease in inventories, miners have been forced to reduce the volume of production of digital assets. Negative trends in stock markets and crypto exchanges began to threaten large investments from mining companies.
According to Blockchain.com, the Bitcoin network’s hash rate — the overall performance of mining equipment on the network — is down 4% since the start of the week. This means that companies dealing with the extraction of digital assets began to allocate fewer computing resources. Also, the remuneration paid to miners turned out to be the minimum for almost a year. Shares in cryptocurrency miners Marathon Digital and Hut 8 fell nearly 40%, while Argo Blockchain’s assets lost 35%.
The cryptocurrency market has seen a significant decline, having dropped below $1 trillion from a record total capitalization of $3.2 trillion in November last year. Bitcoin is trading below $21,000 today, down more than 50% year-to-date. The negative momentum was accelerated by the collapse of stablecoin Terra and suspension of withdrawals by cryptocurrency lending firm Celsius.
Large mining companies usually have some reserves and pay fixed prices for electricity, so small players turned out to be the most vulnerable in the conditions of “crypto winter”. financial times gave the example of Kazakh miner Didar Bekbaouov, co-founder of Xive: He told how he “adapts to new prices and reality” – shutting down capacities that became unprofitable when Bitcoin started trading below $25,000.
The head of Canadian mining company Hut 8, Jaime Leverton, noted that only those of his colleagues who have anticipate the possibility of a crisis in their strategy are afloat. Hut 8 itself has been preparing for a negative scenario all last year, thanks to which it was possible to collect 7078 “free” bitcoins, which are now used to host small players. According to the head of the British Argo Blockchain, Peter Wall (Peter Wall), the “first wave” of such transactions is expected within a year.