Bitcoin miners are rethinking business strategies for long-term survival

Bitcoin miners are rethinking business strategies for long-term survival

The bitcoin mining industry is still facing a challenging year as the price of bitcoin (BTC) hovering around $20,000Besides rising energy costs in North America and Europe. Regulators have also recently begun to clamp down on crypto mining, with a recent report from the Bitcoin Mining Council (BMC) finding that Bitcoin saw a 41% increase in energy consumption on an annual basis. As a result, a number of crypto-mining companies were forced to sell equipment Others have filed for bankruptcy.

However, this has not been the case for some miners, particularly those focused on clean energy solutions and strategic approaches. For example, in September, cryptocurrency mining company CleanSpark About an acquisition agreement Mawson’s Bitcoin mining facility in Sandersville, Georgia, for $33 million. Crypto mining company White Rock Management also recently Mining operations expanded to Texas.

Why are some bitcoin miners thriving in a bear market

Matthew Schultz, CEO of CleanSpark, told Cointelegraph that he views mining as a unique way to lower energy costs when leveraged for reasons other than making a profit. According to Schultz, this perspective has distinguished CleanSpark from other crypto mining companies. “Bitcoin mining is a potential solution to create more opportunities for energy development,” he said.

Schultz explained that CleanSpark partners with cities in the United States, such as Georgia and Texas, to purchase excess energy. For example, he noted that CleanSpark works with local areas in Georgia that receive power from the Georgia Municipal Electricity Authority.

“These cities have essentially become our service provider. They make a margin on every kilowatt-hour we buy to conduct our mining operations. However, we buy such large amounts of energy that it lowers energy costs for the communities we work with. We aim to impact cities. Positively by reducing energy costs.

CleanSpark CEO Zach Bradford inspects a mining rig with technologies at the company’s College Park Bitcoin mining campus. Source: CleanSpark

Schultz also noted that CleanSpark has formed a partnership with energy company Lancium to support their data center in West Texas with Purchasing excess renewable energy To create network stability. As a result, Schultz shared that CleanSpark currently has half a billion dollars in assets on its balance sheet and less than $20 million in debt, along with support from investors like BlackRock and Vanguard. Given this, Schultz believes that cryptocurrency alcohol market CleanSpark has impacted differently compared to other crypto miners.

For example, he notes that when a single Bitcoin was worth $69,000 a year ago, many miners were discussing plans to hold BTC. “These miners have also made huge commitments to companies like Bitmain for the future delivery of mining rigs,” he said. However, according to Schultz, CleanSpark did an extensive analysis of the number of mining rigs ordered last year while also looking at future energy projections. He said:

“We came to the conclusion that instead of sending a deposit of mining equipment to suppliers last November that had just been delivered, we saw the potential for an oversupply of rigs and an increase in energy costs. So we sold bitcoin when it was in the $60,000 range and invested the proceeds in infrastructure. Instead of that “.

Not only has CleanSpark been allowed to acquire a new mining facility in Sandersville, Georgia, but Schlutz also noted that the company is currently buying Bitcoin mining rigs at a very low price. “We buy rigs for $17 per trench that a year ago was $100 per trench.”

As a number of miners have to sell their equipment, both used and new mining rigs are being sold at below market prices, creating buying opportunities for companies like CleanSpark.

Scott Offord, owner of Scott’s Crypto Mining – a service that provides new and used mining equipment, along with mining training courses – told Cointelegraph that miners are now very inexpensive, partly based on a lack of demand due to the lower price of bitcoin. Offord added that many of the user miners he currently sells have come from the city’s hosting facilities. He said:

“During the last bull run, you can’t get miners without a 6-month deadline. It’s the opposite now because many miners are not capitalizing. Bitcoin miners usually get rid of their equipment because the equipment is old and there is something newer out there in the market, but It looks like people are selling now because they need the cash flow.”

Offord also noted that he’s seeing a lot of new mining equipment hitting secondary markets. “Many new generation Antminers are being resold. For example, things like S-19s, which are some of the most efficient miners in the world at the moment.”

In terms of pricing, Offord explained that crypto miners may be able to purchase a new Antminer S-19j pro for around $20 per terahash. “This same machine would have cost three times as much with a lead time of three months a year ago,” he added.

Andy Long, CEO of Bitcoin mining company White Rock Management, told Cointelegraph that miners who sell equipment generally do so to cover debt payments for hardware purchased when prices were higher. “The hardware is now being purchased by well-capitalized miners and will continue to be used to secure the network,” he said.

White Rock Management Texas Mining Site. Source: White Rock Management

According to Long, White Rock Management’s US operations were not affected by the bear market, adding that its Texas facility is operating entirely off-grid. “White Rock operations in the United States are powered by flared natural gas, while mining operations in Sweden are 100% hydroelectric.”

Bitcoin miners are rethinking business strategies

As miners like CleanSpark and White Rock Management continue to grow, others may need to rethink their business strategies. Elliott David, head of climate strategy and partnerships at the Sustainable Bitcoin Protocol — the green bitcoin mining certification protocol — told Cointelegraph that he believes conditions for miners will get worse before things get better. “The miners who want to survive in the long term will have to change their strategy,” he said.

In fact, some miners make modifications. For example, Jonathan Bates, CEO of crypto mining company BitMine, recently Referred In a press release that due to the sharp drop in mining rig prices, the company will currently focus solely on self-mining rather than hosting for others.

“Given the sharp drop in ASIC prices, we feel the focus on self-mining is to make better use of our data center equipment and better use of our fixed capital at this time,” he stated. He added that the company plans to “pursue joint ventures and partnerships where our infrastructure equipment can be paired with ASIC miners at current value.”

The press release also notes that on October 19, Bitmine entered into a buy-back and hosting agreement with the Crypto Company (TCC), a listed public blockchain company.

Under this agreement, Bitmine agreed to buy back some of the ASIC miners previously sold to TCC with the purchase of additional ASIC miners owned by TCC. Bitmine will also terminate its hosting agreement with TCC.

Specifically, the Bitmine TCC sold 70 Antminer T-17s for $175,000, along with 25 Whatsminers for $162,500, for a total purchase of $337,500 during February of this year.

At the same time, Bitmine and TCC entered into a hosting agreement under which Bitmine agreed to host miners, along with other TCC-owned miners.

Given the current circumstances, it has been noted that Bitmine will accept the return of 70 Antminer TY-17s for a credit of $175,000 as collateral. Bitmine will also buy 25 Whatsminers for $62,500 and 72 Antminer T-19s from TCC for $144,000. This represents a significant drop in price from the time the units were initially sold.

In 2021 – during the height of the cryptocurrency race – Bitmine entered into an agreement with a telecom company located in Trinidad and Tobago. The agreement allows Bitmine to co-locate up to 125 800-kilowatt containers to host miners at more than 93 potential locations. Bitmine is also able to locate containers at their own pace, paying a fixed amount per container, along with the electricity costs incurred by their containers.

At the time of the agreement, Bitmine indicated that the rate of electricity expected to be paid for the hosting containers was 0.035 cents per kilowatt-hour. This was based on the price the carrier is currently paying.

In October of this year, Bitmine completed the installation of its initial container hosting in Trinidad. However, prior to the start of operations, Bitmine reported that the telecommunications company had informed the electric company that it would not honor its existing agreement and instead indicated that the price would be around $0.09 per kilowatt-hour. Although the carrier has protested this decision, Bitmine has chosen to delay the installation of additional containers in Trinidad until the dispute is resolved.

The future of cryptocurrency mining

Given the recent changes made by miners, David believes that the crypto mining industry is approaching a crossroads. “The miners will need to diversify their revenue sources,” he said. With this in mind, he explained that there is a growing interest from clean energy miners who want to work with the sustainable Bitcoin protocol to ensure sustainable mining practices as a way to be more financially resilient.

Echoing this, Offord stated that he sees more interest from miners in terms of their environmental impact. “Miners are looking for opportunities where there is flared gas that needs to be diluted, or where biofuels are being produced from farm waste. Miners are not just focused on building a bitcoin mine, but they want to build something sustainable that can be carbon negative.”

In addition to sustainability, David noted that regulation is more important than ever for crypto miners. This is particularly true within the United States, he noted, noting:

“Industry in the US is increasingly aware that unless it regulates various levels of government may be involved. I have spoken with a number of policy makers and staff, and in the crisis of the bitcoin mining industry will likely be the first to be targeted.”