Bitcoin miners rethink business strategies for long-term survival

Bitcoin mining continues to face a challenging year as the price of Bitcoin (BTC) hovers below $20,000, coupled with rising energy costs in North America and Europe. Regulators have also recently started cracking down on cryptocurrency mining, as a recent report by the Bitcoin Mining Council (BMC) found that Bitcoin’s energy consumption has increased by 41% year-on-year (YoY). As a result, some cryptocurrency mining companies were forced to sell equipment, while others filed for bankruptcy.

However, this is not the case for some miners, especially those focused on clean energy solutions and strategic approaches. For example, in September, cryptocurrency miner CleanSpark announced an agreement to acquire Mawson’s Bitcoin mining facility in Sandersville, Georgia, for $33 million. Cryptocurrency mining firm White Rock Management also recently expanded its mining operations to Texas.

Why Some Bitcoin Miners Are Thriving in a Bear Market

Matthew Schultz, executive chairman of CleanSpark, told Cointelegraph that he sees mining as a unique way to reduce energy costs for reasons other than profitability. According to Schultz, this view sets CleanSpark apart from other cryptocurrency mining companies. “Bitcoin mining is a potential solution to create more opportunities for energy development,” he said.

Schultz detailed CleanSpark’s partnership with U.S. cities in Georgia and Texas to buy excess energy. For example, he noted, CleanSpark works with local districts in Georgia that get their energy from the Georgia Municipal Power Authority.

“These cities are basically becoming our utility providers. They make a profit on every kilowatt hour we buy to run our mining operations. However, we are buying such a large amount of energy that it reduces working with us energy costs in our communities. Our goal is to positively impact the city by reducing energy costs,” he said.

CleanSpark CEO Zach Bradford inspects a mining pod with technicians at the company’s College Park bitcoin mining campus. Source: CleanSpark

Schultz also noted that CleanSpark has a partnership with energy company Lancium to support their West Texas data center by purchasing excess renewable energy to build grid stability. As a result, CleanSpark now has $5 billion worth of assets and less than $20 million in debt on its balance sheet, while backed by investors like BlackRock and Vanguard, Schultz said. Given this, Schultz believes that the cryptocurrency bear market has had a different impact on CleanSpark than other cryptocurrency miners.

For example, he noted that when one bitcoin was worth $69,000 a year ago, many miners were discussing plans to hold BTC. “These miners have also made huge commitments to companies like Bitmain to deliver mining equipment in the future,” he said. However, according to Schultz, CleanSpark conducted an extensive analysis of the number of miners ordered last year, while also looking at for future energy forecasts. He says:

“We came to the conclusion that instead of sending a deposit for mining rigs to suppliers that had just been delivered last November, we saw the potential for an oversupply of rigs and increased energy costs. So when the bitcoin price was at 60,000 When it’s around the dollar, we sell it and invest the proceeds in infrastructure.”

Not only has this enabled CleanSpark to acquire its new mining facility in Sandersville, Georgia, but Schlutz also noted that the company is currently buying bitcoin mining rigs at very low prices. “We’re buying rigs for $17 per terahash compared to $100 per terahash a year ago.”

With many miners forced to sell their equipment, both used and new mining rigs are being sold at below-market prices, creating buying opportunities for companies like CleanSpark.

Scott Offord, owner of Scott’s Crypto Mining, a service that offers prices for new and used mining equipment as well as mining training, told Cointelegraph that miners are now very cheap, in part due to a lack of demand due to low bitcoin prices. Offord De added that many of the used miners he currently sells are from indebted hosting facilities. He says:

“During the last bull run, you couldn’t get miners without a 6-month lead time. Now it’s the opposite because many miners are not capitalized. Usually Bitcoin miners have newer ones on the market because their equipment is outdated. equipment and give up their equipment, but now people seem to be selling because they need cash flow.”

Orford also noted that he sees a lot of new mining rigs entering the secondary market. “A lot of new generation Antminers are being resold. For example, things like the S-19, which are the most efficient miners in the world right now,” he said.

In terms of pricing, Orford explained that cryptocurrency miners may be able to buy the new Antminer S-19j pro for about $20 per terrahash. “A year ago, with a three-month lead time, the machine would have cost three times as much,” he added.

Echoing Orford, Andy Long, chief operating officer of bitcoin mining firm White Rock Management, told Cointelegraph that miners who sell equipment often do so to pay off debt for hardware they bought when prices were higher. “Hardware is now being purchased by well-capitalized miners and will continue to be used to secure the network,” he said.

White Rock manages the Texas mine.Source: White Rock Management

White Rock Management’s U.S. operations have not been affected by the bear market, according to Long, adding that its Texas facility operates completely off the grid. “White Rock’s U.S. operations are powered by burned natural gas, and our mining operations in Sweden are also 100% hydroelectric.”

Bitcoin miners rethink business strategy

While miners like CleanSpark and White Rock Management continue to grow, others may need to rethink their business strategies. Elliot David, head of climate strategy and partnerships for the Sustainable Bitcoin Protocol, a green bitcoin mining certification protocol, told Cointelegraph that he thinks conditions for miners will get worse until things improve. “Miners who want to survive in the long term will have to change their strategy,” he said.

In fact, some miners are making adjustments. For example, Jonathan Bates, CEO of cryptocurrency mining company BitMine, mentioned in a recent press release that due to the sharp drop in mining equipment prices, the company will currently focus only on self-mining, while Not hosted for others.

“Given the sharp drop in ASIC prices, we believe that focusing on self-mining is a better use of our data center equipment and a better use of corporate capital,” he said. He added that the company plans to “seek joint ventures and partnerships where our infrastructure equipment can be paired with ASIC miners at current prices.”

The press release further states that on October 19, Bitmine entered into a repurchase and escrow agreement with listed blockchain firm The Crypto Company (TCC).

Under the agreement, Bitmine agreed to buy back certain ASIC miners previously sold to TCC, while also purchasing additional ASIC miners owned by TCC. Bitmine will also terminate the custody agreement established with TCC.

Specifically, in February of this year, Bitmine sold TCC 70 Antminer T-17s for $175,000, and 25 Whatsminers for $162,500, for a total purchase of $337,500.

At the same time, Bitmine and TCC entered into an escrow agreement, according to which Bitmine agreed to escrow the miners and other miners owned by TCC.

Due to the current situation, Bitmine will accept the return of 70 Antminer TY-17s with a $175,000 credit as a warranty claim. Bitmine will also buy 25 Whatsminers from TCC for $62,500 and 72 Antminer T-19s from TCC for $144,000. This marks a significant drop in price compared to when the units were originally sold.

In 2021 — at the height of the cryptocurrency bull market — Bitmine struck a deal with a Trinidad and Tobago-based telecommunications company. The protocol allows Bitmine to co-locate up to 125,800 kilowatt containers for hosting miners in more than 93 potential locations. Bitmine is also able to put containers together at its own pace, paying a fixed amount for each container, as well as the electricity bills generated by the container.

At the time of the agreement, Bitmine noted that it expected to pay 0.035 cents per kilowatt-hour for electricity to host the containers. This is based on the rates currently paid by telcos.

In October, Bitmine completed the installation of its initial hosted container in Trinidad. Before starting operations, however, Bitmine said the telco informed the power company that it would not abide by its existing agreement, instead saying the rate would be around $0.09 per kilowatt-hour. Although telcos protested the decision, Bitmine opted to delay the installation of additional containers in Trinidad until the dispute was resolved.

The future of cryptocurrency mining

Given the recent changes made by miners, David believes that the cryptocurrency mining industry is approaching a meeting point. “Miners will need to diversify their sources of income,” he said. With this in mind, he explained that there is growing interest from clean energy miners who want to work with sustainable bitcoin protocols to ensure sustainable mining practices to improve financial resilience.

Echoing this, Orford mentioned that he sees miners becoming more interested in their environmental impact. “Miners are looking for places to reduce flare gas emissions, or to produce biofuels from farm waste. Miners are not just focused on building bitcoin farms, they want to build something sustainable and carbon-negative. ”

Sustainability aside, David noted that regulation has become more important than ever for cryptocurrency miners. This is especially true in the United States, he noted, stating:

“Industry in the U.S. is becoming more aware that unless they regulate themselves, all levels of government may step in. I’ve spoken to many policymakers and staff, and in times of austerity, bitcoin mining could become The first goal.”

Source of information: Compiled from COINTELEGRAPH by 0x information.The copyright belongs to the author Rachel Wolfson and may not be reproduced without permission

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