Lately, bad news has abounded, and the resulting fear is real. DeFi looks dead, altcoins complete their life cycle by going back to $0 (a joke I guess), and Bitcoin’s (bitcoin) for a price lower than even the brightest brains in the room expected.
A unifying theme of the recent bull market seems to be greed.Everyone has become too confident and too greedy, and this is shown by the amount of debt and leverage being unloaded 3AC, Celsius, BlockFi and Voyager Tackle the real threat of bloating.
It seems that Bitcoin miners and BTC mining companies are also not immune to the sentiment of excess exuberance and the belief that “only up” is a fact until the Bitcoin price reaches the long-awaited $100,000 target for most analysts.
Historically, Bitcoin miners have been an elusive species, quiet and reluctant to spill the sauce on the public, but Cointelegraph made a point of discussing the state of the mining industry and its predictions with HashWorks CEO and founder Todd Esse. Some successes are where the market might go next year.
telegraph: Bitcoin is trading at a lower price than it actually isalso lower than production cost of miners. The price is also below its previous all-time high and the hash rate is falling. Often, on-chain analysts take these metrics down to extreme lows as generational buying opportunities, idea?
Todd this: I do believe current prices represent an investment opportunity as current prices may not reflect profitable mining profits for the current structure of the industry. But in our view, prices are likely to remain under pressure as the mining industry and its associated leverage are reset or reconfigured.
Computed Tomography: What is the current state of the BTC mining industry? We hear that leveraged miners are going bankrupt, sub-optimal, inefficient miners are shutting down, and equipment may be being confiscated or liquidated in a sell-off. The stock price and cash flow of the listed miner are also looking dire right now. What’s going on behind the scenes? How do you see this impacting the industry over the next six months to a year?
TE: We believe that mining still offers attractive investment returns for those who choose the method and have long-term goals. Most of the mining capacity currently installed is using ASICs in the sub-85 TH/s range and energy contracts that are not yet managed like traditional large-scale energy consumers.
We’ve seen this movie before, right? Easy money + bad discipline = unbalanced risk. We can easily see a long period of consolidation in the mining industry and allowing different investment capital to enter the market.
Computed Tomography: Why exactly is now a good or bad time to start mining? Are you looking at specific on-chain metrics or profitability metrics, or is it just your gut feeling?
TE: Typical dilemmas and shifts in accepted paradigms will give new entrants an edge. Our sole focus is to capitalize on these emerging opportunities.
Computed Tomography: If I have $1 million in cash, is now a good time to build a business and start mining? $300,000, $100,000, $10,000? In the $40,000 to $10,000 seed funding range, why isn’t now a good time to set up a home or industrial scale mine?
TE: If you have $1 million in cash, this might be a good time to get some BTC opportunistically. Full production prices for major miners are not far from these levels. I think it will be difficult to maintain these levels until ASIC depreciates further. I think the days of home mining are over because of the new dynamics in the energy industry.
I would encourage those seeking yield to pursue mining opportunities with companies such as Compass Mining or other “cloud” miners whose equipment and energy contracts may make attractive investments as these dynamics change.
We believe there will continue to be attractive opportunities to build mining operations at scale due to current and anticipated market disruptions and greater acceptance of immersive solutions.
Computed Tomography: Is Bitcoin price falling below its previous all-time high for the first time, and will it have a significant future impact on the fundamentals of the asset and industry?
TE: In our opinion, no. It is difficult to rely on historical comparisons when dealing with emerging commodities and transformative technological assets like BTC. Miners are producing BTC, given a set of inputs (computing power, capital, and energy), and output prices do not always reflect the cost of production.
Fundamentally, mining BTC on a large scale is not much different from producing oil and gas or other commodities. Improvements in drilling technology have transformed North America’s position in the global energy market.
When oil and gas prices plummeted in the early days of the pandemic, no one questioned whether we needed to drive or heat our homes. Mining supports blockchain, and proof-of-work computing will provide our grid with the ability to transition to a renewable energy future.
As the industry continues to mature, we aim to be an innovative and constructive player in the industry.
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