The price of bitcoin (BTC) is down about 70% from its last all-time high (ATH), and miners are benefiting most from this steep drop. Fear, Uncertainty and Doubt (FUD) affect them. Six key data sets illustrate the effects of: bear market on bitcoin (BTC) miners.
Monthly earnings: the state of the mining industry
Fully bear marketBitcoin miners are experiencing a significant drop in revenue, as can be seen in the chart above. Monthly mining revenues in June 2022 hit their lowest level in 18 months. From August 2021 to April 2022, miners enjoyed at least $1 billion in total revenue for nine consecutive months. May put an end to this bonanza and revenues continued to decline in June.
Looking more closely at mining revenues, transaction costs (fees) are an important (and much-discussed) income category. at a bull marketfees typically make up a significant percentage of miners’ monthly earnings, in full, of course bear market income from fees are falling. From August 2021 to May 2022, fees were approximately 10-15% of monthly revenue, but since August this figure has fluctuated around 1%. In fact, fees have accounted for no more than 2% of mining revenues since August, as shown in the line chart above.
The bear markets often cause a staggering price drop of rigging of mining, we can see it clearly in the chart above. Since the beginning of the year, the prices of rigging (regardless of efficiency and profitability) decreased by 50-60%. If the price of bitcoin (BTC) continues to fall, so will the prices of mining hardware. (A chance to switch gear?)
Of course, machines that are no longer profitable are scrapped. This is clearly visible in the hash percentage of Antminer S9s, an older generation rig developed by Bitmain. Compared to a 35% share of the hash rate of these machines a year ago, S9s now contribute just 5% to the overall hash rate, according to data from Coin Metrics. ” At these bitcoin (BTC) prices, the S9 is just scrap said Coin Metrics analyst Parker Merritt.
Mining revenues also depend on their computing power: the price of the hash (hash price), measures revenue in dollars per unit of hashing power activated per second per day. This statistic fluctuates and may fall even if the price of bitcoin (BTC) rises. The chart above shows the growth in mining difficulties and the decline in the price of hashish since early 2022. At the end of June, the price of hashish fell below $0.10 for the first time since the end of October 2020.
The crash in the stock prices of crypto mining companies is probably the strongest signal of the current market conditions. Most crypto mining companies have significantly devalued physical mining assets, thus operating at ever-smaller profit margins as the price of bitcoin (BTC) falls.
The chart above shows the one-year normalized performance of a dozen different Nasdaq-listed crypto mining companies. Nearly all stocks have lost at least 60% during this period. Stronghold Digital Mining’s action even lost 94%.
The price of bitcoin (BTC) has a major impact on the income of miners: less than fees, a less profitable material (if at all) and likely increasing energy costs. It remains to be seen what bitcoin (BTC) will do for miners to develop a profitable strategy and thus maintain network security. Another massive sell-off could lead to an even more violent crash.
Source: Bitcoin Magazine
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Subprimes, financial crises, galloping inflation, tax havens… Bitcoin is designed for greater transparency and perhaps finally changing the situation. I try to understand this new environment and try to explain it myself. The road is undoubtedly long, but it is worth it.