With the crypto market still dragging through the mud, several Bitcoin miners have been forced to liquidate their holdings just to stay afloat. Once a lucrative operation, Bitcoin mining has lost its charm in the last seven months, especially as Bitcoin continues to stutter around the $30,000 mark, which is less than half of its all-time high of $69,000.
Among the heavy off-loaders is Bitcoin mining firm Riot Blockchain, which sold 250 BTC in April 2022 for $10 million. The company had been amassing Bitcoin with the hope that appreciating prices would make the stockpile worth a huge amount.
However, the current bear run has had completely the opposite effect. The timing couldn’t be worse either — Riot is currently in the middle of setting up a brand new 1-gigawatt mining facility in the state of Texas.
Even small-scale miners have been exiting operations after the Bitcoin nosedived 12.7 percent over the last month alone and 33.8 percent since the start of 2022.
One such company, Cathedra Bitcoin, was compelled to sell 235 BTC, which is almost 100 percent of its Bitcoin holdings, just to survive the crypto winter and sustain operations through the frenzy. “We have spent the last several weeks restructuring our balance sheet and operations to ensure Cathedra is well-positioned to endure a prolonged economic downturn,” said AJ Scalia, CEO of Cathedra, in a statement.
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Coin Metrics data compiled by Compass Mining indicated that 195,663 BTC made their way from Bitcoin miners’ wallets to crypto exchanges in May 2022. This amounts to the largest outflow of BTC since January 2022.
Bloomberg estimates that the transferred BTC amounts to $6.3 billion. However, it must be noted that BTC making their way to the exchanges doesn’t mean they were sold. Tokens also reach exchanges when they are staked on the platform by the miners.
“Miners may begin to sell hodl’ Bitcoin into the open market,” wrote Compass Mining in its research note. “At the very least they are feeling the pain after the last major dip in price. Couple this with a downwards difficulty adjustment — indicating miners powering off — and it seems miners may be hitting a wall in profitability,” it went on.
“I think miners are just talking about the macro environment and think it is probably prudent to sell Bitcoin in these levels in order to keep the operations safe,” said Will Foxley, Content Director at Compass Mining, to Bloomberg.
Marathon Holdings is among the first few names to come to mind upon hearing the word ‘Bitcoin’. The mining mammoth holds 9,673 BTC, which is worth $304.5 million presently.
The firm held these BTC for over two years, which means that in November 2021, the same reserves would’ve been worth $667.4 million — more than twice its current value. In its earnings call last month, the idea of a Bitcoin sale to cover losses was also floated.
Is Bitcoin mining still profitable?
Aside from Bitcoin prices, the profitability of operations also depends on the mining rig being used. Newer, more efficient machines use less energy and process transactions much faster, making them more efficient and profitable.
For instance, a report by Bitcoinist shows that the Bitmain Antminer S19 had a cash flow of $50,000 per BTC at the end of the bull run in November 2021. However, that has dropped to $23,000 with the price of Bitcoin hovering around the $31,000-mark.
At this price, older rigs such as the 2017 Bitmain Antminer S9 provide a cash flow of $8,000 per BTC mined. Considering that the S9 runs at 6 cents for every kilowatt-hour (kWh), there is a thin very line between breaking even and making losses. On May 25, Denis Rusinovich, Co-Founder of CMG Cryptocurrency Mining Group and Maverick Group, told CoinDesk that all miners paying over 5 cents per kWh would be cutting the thin branch they are sitting on.
Further, data from Blockchain.com shows that daily revenue for BTC miners was at $40.57 million on May 1, 2022. However, it dropped to $29.37 million by the end of the month, even touching an eleven-month low of $22.43 million on May 24th. Therefore, while Bitcoin mining still is profitable, margins have shrunk considerably, and the road ahead certainly looks rough.
