Bitcoin mining: predicting the future of crypto assets? | coindesk JAPAN | Coindesk Japan

Former CoinDesk chief Brady Dale wrote last week in an article titled “Crypto will be fine,” saying that while crypto assets have suffered throughout 2022, some indicators remained bullish.

In particular, the hash rate, which indicates the amount of computational power devoted to keeping the Bitcoin network secure, remained stable.

“If the industry is going to end, then miners should be dwindling, but they are not,” Dale said. In fact, according to data from Blockchain.com, Bitcoin hashrate hit an all-time high in November 2022.

Bitcoin’s hashrate has continued to climb consistently over the past 12 months, even as Bitcoin (BTC) has lost more than two-thirds of its value. For many, this was a sign of confidence in the long-term success of the Bitcoin network.

2022 years of hardship

Of course, this one metric doesn’t tell the whole story. As Zack Voell of Compass Mining points out, 2022 has taken a toll on the bitcoin mining industry.

Listing “all the pain points that miners have suffered,” Boel said at least four executives at major mining companies have resigned and six lawsuits have been filed against mining companies. In addition, the stock prices of listed mining companies also slumped.

Additionally, Core Scientific and Compute North have filed for bankruptcy. Crypto-lending firms Celsius Network and BlockFi, both of which have filed for bankruptcy, also had sizable mining units, but are unlikely to be forced to reorganize their operations. expensive.

Marathon Digital and Argo Blockchain are also at risk of filing for bankruptcy.

Each company’s situation is different, but the main cause of the problem is the low Bitcoin price and poor financial management. Many mining companies have spent the last few years holding onto mined bitcoin while pursuing rapid growth strategies through debt and investment.

Related article: Bitcoin mining companies need to survive

The Foundry, a cryptocurrency mining and staking company, predicted that the Bitcoin price would reach $100,000 and said, “Many miners were operating with excessive confidence.” said Juri Bulovic, head of mining at .

Things were going well when bitcoin prices rose and funding costs were cheap, but with macroeconomic uncertainty and interest rate hikes, those two factors have changed.

Outlook for 2023

Already, outside companies are stepping in to cover losses or inject needed capital into the declining mining industry.

Galaxy Digital bailed out Algo for $100 million, while cryptocurrency exchange Binance set up a fund for miners. US investment giant BlackRock also recently lent $17 million to Core Scientific, which had filed for bankruptcy.

The mining industry is in peril, but the industry itself is doomed, thanks in part to state-of-the-art mining equipment that was ordered and deployed during a booming 2021 period when bitcoin prices climbed to near $69,000. You won’t end up doing it.

The companies that have stood the test are financially strong, and new ways of raising money have emerged, such as derivative options that allow miners to hedge the risks of mining, much like they do in other commodity markets such as oil.

More bankruptcies are possible, and unprofitable miners may go out of business. However, given the mining industry’s global reach, the presence of enthusiastic investors and advocates, and the growing importance of mining in the energy industry, the mining industry will survive. Rather, it may be better after recent troubles.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Eliza Gkritsi/CoinDesk
｜Original: Bitcoin Mining: A Positive or Negative Indicator for the Future of Crypto?