Bitcoin miners are bundling up for the crypto winter

With a crypto winter in full force, Bitcoin miners are finding themselves in a tough spot. Falling Bitcoin prices are dragging down earnings — and economic conditions haven’t made it any easier on them.

How are miners doing?

Many Bitcoin miners went public in recent years — taking advantage of the last crypto bull market.

• Reminder: Bitcoin miners secure the network and verify transactions through a process called mining to receive Bitcoin. The higher Bitcoin’s price is, the more miners make.
• For many investors, Bitcoin miners were a way to get leveraged exposure to Bitcoin without directly holding it.

On the way up, mining stocks outperformed $BTC. On the way down, mining stocks are falling harder…

Bitcoin is down 40% in 2022, while the largest public Bitcoin miners, including Core Scientific (NASDAQ:CORZ), Marathon Digital (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT), are all down 70% plus.

As if crashing bitcoin prices weren’t enough, current market conditions are also giving miners a tough time…

Nothing is going right for Bitcoin miners…

Rising energy prices increase the cost of running Bitcoin mining operations, and supply chain issues are impacting miners. Early May, Hive Blockchain Technologies (NASDAQ:HIVE) said they had difficulty sourcing electrical equipment to expand their operations.

SODLers: Bitcoin miners prefer holding their mined Bitcoin — but with costs rising and $BTC falling, many are forced to sell to cover expenses.

• Several miners, including Riot and Core Scientific, have already sold part of their Bitcoin in the past few months.
• Newer and smaller miners will be worse off — with a merger or sale being the likely option per Michael Ashe of Galaxy Digital.

Who’s the strongest? According to Arcane Research Analyst Jaran Mellerud (CoinDesk), Riot Blockchain (NASDAQ:RIOT) seems to be the strongest of the five largest public miners.

A resurgence in China’s Bitcoin mining industry also adds pressure to global miners.

Investors: The underground mining scene

China was once the largest Bitcoin producer in the world — with an estimated 65% of global Bitcoin production. Then the Chinese government banned Bitcoin mining in 2021.

• China’s ban made it much easier for remaining miners to mine Bitcoin. After China’s ban, Hut 8 Mining (NASDAQ:HUT) mined 40-50% more Bitcoin without any additional cost.
• But since the ban, China’s Bitcoin mining activity has surged, likely from underground mining — with China back at the second-largest producer, behind the U.S.

Larger Bitcoin miners have been through past crypto winters — emerging stronger after each one.