- While salaries, rent and electricity have to be paid for in fiat currency, cryptocurrency miners are now struggling to make those payments given falling prices of digital assets.
- In some cases, the biggest miners operating in Texas actually sold energy back to the grid as it became more profitable to do so rather than mine crypto.
In the world of digital assets, one of the most capital intensive has to be cryptocurrency mining.
Not for the faint-of-heart, cryptocurrency mining is in many ways no different than any other high capital outlay business, from hardware costs to land rent, and cooling to electricity.
Making matters even more challenging for cryptocurrency miners, the fruit of their labor can be volatile.
While salaries, rent and electricity have to be paid for in fiat currency, cryptocurrency miners are now struggling to make those payments given falling prices of digital assets.
The Crypto Winter is having wide-ranging implications for the overall crypto ecosystem,
As the high cost of energy and the flatlining price of digital tokens pushes more miners close to a financial cliff edge, there is a growing pressure of bankruptcy, especially at some of the more highly levered listed-miners.
Last week, Nasdaq-listed Core Scientific, the world’s largest Bitcoin miner, warned it could file for bankruptcy protection as its cash resources would be depleted by the end of the year.
According to the filing, “the payments are in respect to several of its equipment and other financings and that creditors may decide to sue the company for non-payment or take action with respect to collateral.”
On Monday, London-listed Argo Blockchain echoed that gloomy outlook, saying it may be forced to cease operations after a critical fundraising fell through.
Those warnings came only weeks after Computer North, which operates data centre services for miners, filed for bankruptcy in light of challenging market conditions and potentially owing up to US$500 million to creditors.
Industry analysts and executives have questioned the sustainability of mining especially after prices of leading tokens have been rangebound since June and made worse by Ethereum, the world’s second most valuable blockchain, moved to a Proof-of-Stake method to secure transactions that would negate the need for miners.
The high cost of energy has also caught many miners out and trimmed ambitions, with Argo, Core Scientific and Riot Blockchain scaling back their Texas operations in July, as demand for energy threatened to overwhelm the power grid.
In some cases, the biggest miners operating in Texas actually sold energy back to the grid as it became more profitable to do so rather than mine crypto.
