The most efficient Bitcoin mining machines are selling for 77% less than last year. The machines used to process transactions currently cost about $24 per 100 “terahashis,” a measure of a machine’s computing power, according to mining services firm Luxor Technology Corp. Last year, the same machines cost about $106.
Mining companies like
Core Scientific Inc.
expanded rapidly during the boom, sometimes borrowing hundreds of millions to buy hardware and build warehouses to store the hardware. These operations were profitable when Bitcoin and crypto were booming.
After the Federal Reserve began interest rate hikes, risky assets became less attractive. Tech stocks and cryptocurrencies fell sharply. When bitcoin crashed— currently down about 70% from a year ago — mining companies’ expenses, especially their debt payments, have outstripped their revenues. For some, their only move to raise money right now is to sell their hardware.
One of the world’s biggest mining companies, Core Scientific, on Wednesday said it would default on “several of its equipment and other financings” as it expects to run out of cash by the end of the year and is exploring its options . The stock fell amid fears of bankruptcy. On Friday, it was trading at just 16 cents, down nearly 99% since the start of the year.
Other mining companies also saw their shares fall sharply.
down 93% year to date.
drops by 94%.
Riot Blockchain Inc.
decreased by 74%.
Hut 8 Mining corp.
drops by 70%.
decreased by 67%.
Sometimes miners sell hardware they just received.
Last week, PLC said it would sell 3,800 brand new machines – equipment that hasn’t even been taken out of their boxes – to raise capital.
Sellers like it
dominate the market right now, said Luxor’s chief operating officer, Ethan Vera. Luxor operates a trading desk that brokers the equipment.
He estimated that there were only about three dozen major buyers in the Western Hemisphere. “Almost everyone is a salesperson,” he said.
There has always been a secondary market for specialized computers used to process and record Bitcoin transactions, often called mining rigs, or ASICs, which stands for application-specific integrated circuit.
The fallout attracts buyers of distressed assets. Grayscale Investments is a money manager best known for its
a fund that launched in 2013 and has $13 billion in assets under management. The company created a fund to buy and operate these mining rigs at a discount. The fund is currently seeking investors and requires a minimum investment of $25,000. Buyers of the fund will receive a permanent share of the profit from the mining operation they will create with the purchased equipment.
“The industry as a whole is under pressure, but investors see it as an opportunity,” said Grayscale CEO Michael Sonnenschein.
Other companies that buy mining equipment include Bitdeer Technologies, a company founded by Jihan Wu, who previously founded Bitmain, one of the largest mining equipment companies. Bitdeer is setting up a $250 million fund to buy and operate mining equipment.
Mining can still be profitable for companies that don’t have a heavy debt load, and as some miners close, others fill the void. A measure of the Bitcoin network’s total computing power, called hashrate, recently hit record highs, according to Blockchain.com, a sign that more machines are coming online.
Newer, more efficient and ultimately more profitable machines are contributing to the rise in hashrate, said Andy Long, CEO of mining company White Rock.
Geoffrey Burkey, who heads the ASIC trading department for Foundry, another mining services firm, said activity on his desk had increased significantly in the past week or so. He suspects that reluctant sellers holding out hope for better prices were forced by the rising hashrate to finally just capitulate and sell.
“It grounded the miners to a point where they no longer had a choice,” he said. “It’s going to get even crazier in the coming weeks.”
Write to Paul Viña at [email protected]
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