New data According to blockchain analysis firm CryptoQuant, miners are rapidly exiting Bitcoin’s position.
14,000 Bitcoins, worth more than $ 300 million at current prices, Single 24 hours last weekend — And in the past few weeks, miners have offloaded the largest amount of Bitcoin since January 2021. This phenomenon is called “miner surrender”. And it usually indicates that miners are preparing to sell previously mined coins to cover the ongoing mining costs.
Bitcoin is currently trading at around $ 21,600, up about 3% in the last 24 hours. Still, the broader crypto market has been sluggish for several months, with Bitcoin down nearly 70% from its November 2021 record high of about $ 69,000.
Meanwhile, inflation is weeping and energy costs have reached record highs as the war between Russia and Ukraine intensifies.
Lower Bitcoin prices and higher energy costs are putting pressure on miners’ profit margins. This is part of the reason Bitcoin is sold at its current price to curb its exposure to the sector’s ongoing volatility and further reduce the risk to earnings.
Citi analyst Joseph Ayub said on July 5: “Given rising electricity costs and a sharp drop in Bitcoin prices, Bitcoin mining costs could be higher than some miners’ prices. There is. “
“The Bitcoin mining industry could be under increasing pressure with reports of resignation from mining companies and miners who used equipment as collateral to borrow money,” the memo continued.
Core ScientificOne of the largest listed cryptocurrency mining companies in the United States, sold almost all Bitcoins in June. CEO Mike Levitt tells CNBC that Bitcoin miners, like any other business, need to pay an invoice.
“We mine Bitcoin to earn and produce, but our costs, costs and liabilities are in dollars,” says Levitt.
According to Levitt, mining Bitcoin is still beneficial, with a margin of about 50% across the industry. This is down from the peak 80% margin.
Last month, Core sold 7,202 Bitcoins at an average price of $ 23,000. Levitt told CNBC that it invested approximately $ 167 million in revenue primarily in growth-oriented activities. This includes new ASIC servers and additional data center capacity for self-mining and colocation businesses.
However, they also repaid the debt and deployed a portion of its capital to assist in the settlement of employee stock swaps for five years.
In the long run, Levitt is optimistic. This is because the business has a very positive operating leverage. Beyond certain levels, for every $ 1 of Bitcoin’s price increase, Bitcoin Miner’s operating profit will be 100%.
“If Bitcoin returns to $ 35,000, $ 40,000, we’ll all cheer loudly, and there’s no doubt about that,” he said.
However, productivity per unit of electricity is also important, and at low prices, large miners like Core Scientific tend to be less competitive with enthusiasts and small businesses.
“When prices go down, inefficient miners leave the network, which lowers the global hash rate (or the competition for Bitcoin production),” Levitt explains.
Hash rate is a term used to describe the computing power of all miners in the Bitcoin network, down 15% last month. This is ultimately good for large miners who can afford to survive the recession.
As inefficient miners move off the network and the global hash rate drops, the productivity of machines that continue to mine Bitcoin will increase.
“Therefore, for each Bitcoin generated, the cost of energy goes down,” Levitt said.