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At the end of 2022, the market is bearish, the sentiment of bitcoin miners is very bad. Rig operators suffer. Profits have evaporated. Equity valuations slumped.
Respondents in various Twitter polls predict that less than half of bitcoin miners will survive. Indeed, Core Scientific became the first public bitcoin miner to declare bankruptcy.
Opportunists began circling the corporate carnage. Binance found an easy opportunity to provide loans to distressed companies. Bitdeer Jihan Wu started a $250 million fund to buy troubled assets.
Read more: Stressed bitcoin miners can’t sell dips fast enough
Now that bitcoin is above $20,000, more miners are restarting their rigs. The average hashrate devoted to bitcoin rose to over 272 trillion calculations per second on January 23.
This year, Hive Blockchain has increased +122%, Riot +84%, Canaan +52%, Bit Digital +118%, and Marathon +150%.
Environmentalists voice their sentiments about Bitcoin miners
Naturally, the increased activity brought back criticism about the amount of power Bitcoin wields. The objections included entities such as Hydro-Québec’s request to reallocate the 270 megawatts it had reserved for digital asset mining, citing increased demand for electricity in other areas. Kazakhstan ⏤ historically one of bitcoin miners favorite countries ⏤ is moving one step closer to raising corporate taxes on digital asset mining and limiting the amount of power miners can use. Paraguay rejected a bill that would have imposed tariffs of up to 15% on miners.
As usual, Bitcoiners lament the critical refrain. Bit Digital’s head of strategy, Samir Tabir said, “It seems like no matter what bitcoin miners do, even if we use 100% renewable energy, nothing is going well.” The Bitcoin Mining Council said most of the electricity used for bitcoin mining comes from sustainable sources like hydropower.
Modular bitcoin miners have traditionally moved somewhere cheap, often looking for renewable sources. Although most renewable miners use hydropower, some are turning to alternatives such as nuclear power.
Peak electricity demand makes profitability tricky
Utility companies responded with concerns about the power grid being overloaded if mining activity took off in their area. Texas power grid managers are offering bitcoin mining rig operators incentives to shut down their rigs during peak periods.
Even in places relatively affordable to mine, energy costs can spike unpredictably, cutting into miners’ profits. Without a fixed price contract, a sustainably higher price could shut down the entire firm. However, because contributing hashrate to bitcoins is completely optional and can be paused on the fly, miners can easily pause their rigs if they can’t afford a temporary spike in electricity prices.
Likewise, if they prepay for the electricity contract and then find it more profitable to sell electricity back to the grid during peak demand, bitcoin miners can earn some arbitrage profits. Riot Blockchain, for example, made $4.9 million selling electricity back to the network in December 2022. Hive Blockchain made $3.1 million doing the same.
Clearly, 2022 was a tough year for many bitcoin companies, including miners. With the new year, sentiment is starting to turn ⏤ perhaps with the psychological grace that whatever happened in 2022 is now last year’s news. Bitcoin mining companies are starting to revive their rigs now that they are seeing bitcoin trading well above $20,000, and the entire network is benefiting from increased security.
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Source: https://protos.com/sentiment-turns-from-bear-to-bull-for-bitcoin-miners-in-2023/
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