Crypto winter: will bitcoin miners manage to warm up in 2023?

Miners face great difficulties – The idea of ​​issuing currency that still seemed absurd a few years ago has since become a serious matter. Gone are the days of little computer geniuses messing around in their bedrooms to industrialists listed on the stock exchange. And this sector, which showed cheeky health in 2021, has just passed a complicated year 2022 in all aspects. Deteriorating macroeconomic situation, low bitcoin price, global energy crisis and bear market in cryptora, don’t throw anymore, the cup is full! As a new accounting year approaches, the industry acknowledges the difficulties inherent in its activity and looks to the future with a measured mix of hopes and fears. Bitcoin blackheads testify.

A new economy that must learn from this year 2022

A business model to revisit

To kick off this roundup of the year’s releases, let’s give the floor to Juri Bulovic, head of mining at Foundry Digital. For her,Industry as a whole reacted too deterministic thinking that Bitcoin would go to $100,000 long before it fell back to 20 000. And this, in view of bull run the previous ones. Unfortunately, this did not happen and the sector i mining he soon found himself overwhelmed.

Because the economic model of the industry has shown its limits in many cases. Indeed, Wolfie Zhao, the head of BlocksBridge’s research branch, explains to us that miners have only three sources of funding: selling bitcoins, loan or sale of shares. Faced with serious cash flow problems, many companies have borrowed money, a lot of it.

Crypto miners should be inspired by other sectors of the industry

And in the face of falling prices, the most indebted have been forced to file for bankruptcy or restructure their debt. This was the case with Core Scientific, Greenidge Generation and Stronghold Digital Mining. So how do you avoid this credit addiction? Jaran Mellerud, an analyst at Luxor Technologies, suggests starting a response.

For the sector, it would be a matter of taking inspiration from what oil companies are doing, for example, making risk an economic asset. Why not sell Bitcoin futures? And thus protection in case of a drop in prices. Or, you have one management optimized cash flow by selling bitcoins more regularly as advocated by Wolfie Zhao, instead of waiting to be out of blood and selling at the worst time. So many solutions to consider for the future.

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The mining machines and the hashrat in question

War machine leads to hashrate concentration

Even from the side of machine management, we expect change. Zach Bradford, CEO of CleanSpark, an American miner, realized that a global redistribution was underway at the level of mining machines. Indeed, following bankruptcies and financial difficulties, companies sell their operating assets which are recovered by their competitors in a better financial condition.

Jason Les, CEO of Riot, another American giant in the sector, confirms that he has his own shopping schedule, but that he won’t turn down a little more if a good deal comes along! And this horizontal concentration of the means of production leads to an increase in hashrate, confirmed by Fred Thiel, CEO of Marathon Digital. Thus, its facilities plan to grow from 7 PE/s to 23 PE/s in the coming year.

Technological progress to increase profitability

But to survive and move towards ever greater profitability, manufacturers can also rely on technological progress and general infrastructure restructuring. For example, doing data hosting in addition mining was a popular model recently. But the increase in energy prices made this option wobbleas shown by the example of Compute North or Core Scientific, which was losing money with its facilities.

This is why technical progress can also come to the aid of miners. New hydraulic or immersion cooling systems are certainly expensive, but Juri Bulovic expects costs to decrease with time and a democratization of these methods in the future. Finally, Aydin Kilic, COO of Canadian miner Hive Blockchain, continues to praise the performance of the new model. silicon chip Intel Blockscale ASICs. True game changer for him, it could change the industrial landscape of mining.

Energy crisis and outlook for 2023

The History and Geography of Crypto Mining

And speaking of geography, it’s important to point out some upcoming changes. While North America currently concentrates almost 45% of hashrate between the United States and Canada, the University of Cambridge predicts a mass exodus of miners to South America, the Middle East and Southeast Asia. The first obvious reason is the much more affordable price of energy in these regions.

But regulatory policies are also at the origin of these geostrategic changes. New York State, but also many Canadian provinces have, for example, passed very restrictive laws against cryptocurrency miners. And while energy prices are breaking records and public opinion is suddenly passionate about environmental issues, miners are becoming the scapegoats of the current crisis. Hence their planned relocation.

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Mixed outlook for 2023 and beyond for crypto

Finally, let’s be clear, the industry as a whole is waiting with unabashed anticipation for an increase in the price of Bitcoin. Unfortunately, for Fred Thiel, the price of this asset is conditioned by factors exogenous to the sector. The king of cryptos will thus remain blocked between $16,000 and $21,000 until genuinely positive macroeconomic news arrives. He thinks about Fed policy, but also about the war in Ukraine.

And in the line of sight, to make matters worse, is this celebrity Halve coming. Indeed, next year, around March, bitcoin mining rewards will be halved. On this subject, Fred Thiel is categorical. For him, the price of Bitcoin absolutely needs to double by then for the industry to continue to function. To conclude, let’s quote Cipher Mining CEO Tyler Page, who fully agrees with his colleague and clearly sees Halve like a sword of Damocles over the industry. Not very reassuring for these extraction specialists.

Finally, to the question of whether miners will be able to heat up in 2023, the answer is as follows: it depends! First of all, their ability to rethink their industry over time and to optimize the energy resources needed for their activity. But, also and above all, many factors that they do not control such as the price of their flagship assets, the price of energy or the regulations at work in their sector of activity. All this leads Jason Les to say that he prefers not to bet on a future increase in the price of Bitcoin. He wants to focus on the efforts that will be made now to be profitable with the economic situation. If he survives these harsh winter conditions, TheSpring will only be more beautiful.

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