Bitcoin Miners Fight for Survival as Crypto Winter Deepens  

Key Insights:

• Public BTC mining companies are still selling their stashes.
• Those with the lowest production costs and debts will likely survive.
• Many mining firms will be forced to sell their hardware to others. 

Bitcoin miners have been liquidating their assets over the past couple of months, with exchange inflows steadily increasing, according to data from MacroHive. This has added to the downward pressure on BTC and crypto markets, resulting in the asset falling 74% from its all-time high to just below $18,000 on June 19.

Analysis from Arcane Research revealed that several publically listed mining companies sold 100% of their entire output in May, according to Reuters.

“The conditions have worsened in June, meaning they are likely selling even more,” added Arcane analyst Jaran Mellerud.

Joe Burnett, an analyst at Bitcoin mining firm Blockware Solutions, told the outlet that conditions have worsened for miners over the past six months. Difficulty and hash rate (network computing power) have increased along with energy prices, while BTC prices have fallen over the same period. “These are both negatives for existing miners as both work to compress margins,” he added.

Several publically listed mining firms, including Bitfarms (BITF), Riot Blockchain (RIOT), and Core Scientific (CORZ), have already announced sales, but Marathon Digital (MARA) has yet to offload any.

Survival of the Fittest

On June 27, Mellerud posted his research into public miner cash flows and balance sheets to determine which ones are likely to survive the crypto winter. Direct BTC production cost impacts a miner’s operating cash flow, which ultimately determines when they are forced to power down machines; he noted before reporting:

“Stronghold and Argo have the lowest direct Bitcoin production costs, while Bitfarms and Hut 8 have the highest.”

Those with the more substantial operating cash flows, such as Core Scientific and Riot, are best positioned to pay upcoming expenses, such as debts and machine deliveries. Many, such as Marathon, also have hundreds of millions in cash outflows for machine repayments this year. However, Marathon does have a healthy balance sheet, he added.

Which public #bitcoin miners will be the winners and losers of the bear market?

I analyzed their cash flows and balance sheets to find out.

A thread🧵

— Jaran Mellerud (@JMellerud) June 27, 2022

A liquidity squeeze will force some miners to sell off some of their assets which could be good for others in better positions.

“In the midst of every crisis lies great opportunity, as the best-capitalized miners can buy the struggling miners’ assets cheaply.”

Mellerud concluded that Argo Blockchain was in the best position to survive while Marathon may be forced to liquidate their BTC or sell those upcoming machine orders.

Bitcoin Market Bottom

The slump below $18,000 earlier this month is the first time in any crypto bear market that Bitcoin prices have fallen below their previous cycle peak.

Bitcoin is currently trading below key technical indicators, which could signify that markets are close to the bottom. Earlier this week, Glassnode analysts noted that BTC was trading below several models “which have coalesced around bear market floors in the past,”

#Bitcoin is trading below the following models which have coalesced around bear market floors in the past:

🟦200W moving average
🟧Realized Price
🟥 0.6 x Mayer Multiple

Such events in the past have only occurred for 13 out of 4,360, representing 0.2% of all trading days. pic.twitter.com/DtWGMrL2U2

— _Checkɱate 🔑⚡🦬🌋 (@_Checkmatey_) June 26, 2022

Markets may be close to the bottom, but if previous cycles are anything to go by, they’re likely to stay there for some time yet especially if the macro-economic situation is slow to improve.