Miners suffered profoundly alongside other parties in the digital asset space as markets turned for worse in the fourth quarter (Q4) of 2022 following an equally disappointing first half. Filings with the US Securities and Exchange Commission reflected this deterioration in the case of public mining companies. An incontrovertible display of poor treasury management manifested prevalently last year, exposing the downside in the trite strategy of holding onto part or all of generated coins.
The leveraged borrowing blueprint equally failed to come up to scratch. In 2021 as the markets flourished, most miners sought machine financing to step up their output. However, contrary to projections basing average production costs in the $18,000 to $22,000 range, markets caved in and have left these bettors in dire straits. In the last dozen month, spot prices have declined significantly to unsustainable ranges in the case of mining parties. The overall performance of mining companies constituted proof that miners need to anticipate better and, importantly, manage unprecedented risk events, especially those yielding dire outcomes.
Recent financial and operational reports from mining companies across the board have well illustrated the severity of the effects of debt exposure aggravated by unpredicted spot price volatility. This pressure compelled those with loaned equipment to return them while others enduring similar hardships have taken on worse measures like selling part of their facilities. Here is a look at how the operational budgets of miners are sitting.
Argo Blockchain ascribes December’s drop in crypto mined to hostile weather
Bitcoin mining firm Argo Blockchain’s latest filing with the London Stock Exchange revealed that it mined 147 Bitcoin across December, representing a 26.7% decrease relative to the predecessor month. The publicly-listed miner voluntarily slashed power usage due to a winter storm in Texas, leaving its otherwise higher Bitcoin count at 141 tokens (116 of which were Bitcoin equivalents). In its Jan 11 operational update, the company noted that its Bitcoin mining margin – a non-standard measure of profitability that excludes the depreciation of mining equipment and the effects of fluctuations on the value of crypto – rose to 48%, having closed the month before at 29%.
Last year, Argo came very close to becoming bankrupt but overcame the plight thanks to an acquisition agreement with Galaxy Digital for its previously-owned Helios facility in a $65 million deal. The arrangement, which also featured a $35 million loan, helped better the company’s liquidity position, allowing it to streamline the operating structure. Thanks to this improved financial status, Argo’s total indebtedness fell by $41 million. As of the end of last year, the miner had about $79 million in debt, and its bank balance was approximately $20 million after reaping just $2.49 million in mining revenue across December, a 28% drop from November.
Core Scientific grew Bitcoin production by 5.9% in December, defying winter storm
Core Scientific briskly weathered the December storm per recently released figures, which show it grew its number of Bitcoin mined month-over-month. A 5.83% jump in Bitcoin production raised the crypto firm’s mining activity to 1,435 Bitcoin last month.
Bitcoin production and hash rate
The combined update showed that Core Scientific operated about 243,000 ASIC rigs in November and 234,000 ASIC rigs in December for colocation and self-mining across its US data centers. These generated 24.4 and 23.7 EH/s in the respective months, while self-mining operations increased month-on-month from 15.4 EH/s to 15.7 EH/s. The hash rate adjustment was due to an addition of about 1000 rigs to hit 154,000 machines in the last month of the year. Overall, Core Scientific self-minted a total of 1,435 Bitcoin in December, while colocated servers produced 931 coins.
Power curtailments
Curtailments aimed at managing power requirements and enhancing electrical grid stability were common for most Bitcoin miners towards the end of last year. Core Scientific was no exception to these disruptions. In total, the curtailments accumulated to 5,828 MWh in November and 17,179 MWh in December. The miner filed for bankruptcy in December, citing a sharp decline in Bitcoin prices.
Hive Blockchain mined 4,752 Bitcoin in 2022, representing an 18%addition from 2021
Hive Blockchain’s update for December operations, released this week, detailed that the blockchain platform saw a drop in month-on-month Bitcoin production by 20%. The report indicated that the company mined 213.8 Bitcoin in December at an average of 113.2 Bitcoin Per Exahash from its ASIC miners and general-purpose graphics processing units (GPUs) to mine altcoins which are then converted to Bitcoin. The firm also generated $3.15 million in income from energy price hedging and curtailing its power use.
Hive achieved an equivalent of 184 Bitcoin from the earned cash, according to December prices. In aggregate, the mining company produced a total of 4,752 Bitcoin in 2022 – an 18% spike in production compared to the year before. This came against a 46% increase in computational difficulty during that period. The sale of Bitcoin to cover operational expenses, pursue expansion, and enhance its cash position left Hive’s treasury with 2,348 coins. The Canadian miner is set to continue growing its hash rate, having recently added 3,570 Bitmain S19j Pro miners to its fleet.
Targeting efficiency upgrade with Intel-driven mining rigs
Hive recently deployed the first Intel-powered Bitcoin mining machines, the company revealed in Jan 13 statement. The batch is part of Hive’s purchase order for the rigs, which are based on Blockscale chips, each with an estimated computing power of 110 – 130 terahash/second (TH/s). This figure puts them behind latest models shipping from Bitmain, like the Antminer S19 XP and the S19 Pro+ Hydro. Still, they have been identified as potentially disrupting a mining machine market that is currently dominated by the latter and MicroBT.
Block, Argo Blockchain, and Griid Infrastructure sealed supply agreements with Intel for these machines when the tech company announced the initiative last February. Hive, which put in a similar request in March, received the first order of 5,800 units in December although it had initially planned to purchase 13,000 before reconsideration. More than 1,400 of these have been installed across Canada and Sweden facilities.
The Friday announcement indicated that the fleet of customized mining rigs put to work had met expectations. Though actual figures from the miner are yet to be compiled, estimates from Intel work out their efficiency to be 26 joules/terahash (J/T). Hive’s Intel-powered rollout is expected to conclude when it receives the last of its rigs in production by the end of January. Notably, Hive is one of the miners that have fared well and is looking to stay the course. Following Ethereum’s Merge event that saw the network abandon Proof-of-Work mining which decimated ether mining operations, the company said it is seeking “some great buys for equipment and for everything over these next six months,” adding that it has enough cash backing.
Iris Energy mined 27% less Bitcoin in December at an average of $17k per token
Sydney-based Bitcoin mining company Iris Energy also, this week, shared its investor update for December. Iris indicated in the Jan 12 report a declined performance across the month, with 123 Bitcoin mined (down 19%) and an operating revenue slashed by 27% from the month before to reach $2.1 million. The miner’s average operating hash rate was 1,086 PH/s, a 25% drop from November. This double-digit slump in numbers resulted from dust settling after the firm halted some of its hosting agreements.
The Australia-based sustainable company ended the year debt free, with $39 million of cash in the bank. As the firm installed additional S19j Pro miners in Canada, its computational capacity grew by 30% to 1.5EH/s. Looking ahead, the miner is taking a cautious approach to navigate the current market conditions and take advantage of potential future growth by exploring ways to monetize its assets, such as the $67 million in prepayments made to Bitmain for an additional 6.7 EH/s of mining rigs. Its primary focus is on growing its self-mining operations. Still, it is evaluating options to rent out its data center capacity in the short-to-medium term to cater to the shortage of hosting space in the industry.
Celsius announces sale of its mining machines for $1.3 million
Bankrupt crypto lending firm Celsius Network, which runs a mining arm, disclosed on Wednesday that it is trading 2,687 ASIC mining rigs in a Texas facility for $1.3 million as part of its bankruptcy case. Touzi Capital, a California-based real estate investment firm, will settle the cost of the M30S units from MicroBT, including the shipping cost as per the filed notice of sale. Worth mentioning, Celsius’ mining operation was supported by the now-bankrupt Core Scientific. The hosting provider got approval to shut down mining machines owned by Celsius in a recent development around their dispute which arose from alleged violation and difference of views in the hosting agreements.
Other developments
Bitcoin hash rate grows in the first two weeks of January
The mining hash rate, as observed by tracking dashboards, has been swelling since Dec 28, when it fell to 222 EH/s. Thus far this year, the metric has spiked to 270 EH/s twice. Blockchain.com data also shows that the network hash rate has stayed consistently above 260 EH/s since Jan 3 and was hovering at 262 EH/s at writing. The previous mining adjustment at block height 770,112 saw the difficulty metric decrease by 3.59% while the upcoming one is expected to reflect a 9% increase according to estimates.
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