It’s become clear that current Bitcoin market conditions offer a double-edged sword for miners: in certain ways, there are more obstacles squeezing mining operations and miner margins now than at any point in recent memory, and yet in other ways there hasn’t been a better time to begin mining, or expand mining operations, in just as long.
The psychology of bear markets dictates that these two connected yet competing realities will remain in tension for many, with one potentially winning out over the other at any given time. But miners would do well not to lose sight of either end of the current mining climate, by neither underestimating the difficulties in play, nor letting fear and pessimism prevent them from taking advantage of an ideal time to build operations.
What’s a miner to do? A good place to start is in analyzing the challenges and opportunities that the crypto bear market currently presents for Bitcoin miners. By better understanding the hurdles and risks that mining operations face, as well as the favorable openings that run hand in hand with them, miners can thus attempt to weather the current storm and come out stronger and more profitable on the other side.
Some of the short-term challenges of Bitcoin mining in a bear market are relatively straightforward. While the Bitcoin price is still down considerably, the margins of many mining operations have become thinner, or in certain cases, even temporarily nonexistent. Indeed, certain older mining equipment has already become unprofitable at the moment, while newer models such as Bitmain’s Antminer S19 Pro and MicroBT’s WhatsMiner M30S remain attractively profitable even now. Meanwhile, other vital cost inputs like electricity have either remained the same, or in many cases, due to ongoing inflationary pressures, even gone up. Add high network hashrate and mining difficulty to all this, and it’s easy to see why the very business model for Bitcoin mining has changed for the time being, and in many ways not for the better.
There are other more complex and interrelated headwinds currently facing mining operations as well. A bear market for any commodity often becomes—essentially is—a negative feedback loop as, in the case of Bitcoin, the larger price plunge can force miners, like investors, to sell off holdings in order to stay afloat, which only further contributes to the price drop, which only further fuels selloffs. A bear market can also work to undo some of the hard-won legitimacy that Bitcoin has accrued during this last bull market, leaving many to question Bitcoin’s future and thus further impeding mass adoption, at least for the moment. In short, bear markets aren’t just bad for many existing miners and investors, but for the Bitcoin ecosystem as a whole. So who are they good for, then?
One obvious opportunity embedded in the Bitcoin price dip is the ability to buy not just Bitcoin itself but mining equipment at much lower prices, since many large ASIC manufacturers sell via spot pricing, which fluctuates with the price of Bitcoin. The same ASIC miner might sell right now for substantially less than it did even just a few months ago (and perhaps also for substantially less than it will just a few months from now). For those who still believe in the long-term value and potential of Bitcoin, and there are many of us, the bear market provides an attractive entry-point that many miners and investors thought they’d missed out on years ago, and one that won’t last forever.
Another potential boon for miners, depending on their situation, is that a competitive market will itself weed out some of their competition. Mining difficulty and hashrate have declined slightly in recent months but have stayed historically high overall, which makes a tough situation for miners even tougher when coupled with the Bitcoin price drop. Add to the overall equation the debt that many large mining companies have taken on to finance their current operations, and you have a recipe for selloffs, scale-downs, and even the shuttering of overextended operations. However, those who can continue forward and emerge on the other side, whether large publicly traded mining companies or small independent miners, will be positioned to capitalize handsomely on a less-crowded mining space, and will be grateful that they did once the next bull market rolls around.
The good news is that, if the history of Bitcoin thus far provides any indication, this bear market will prove just as temporary as the others have. Bitcoin has already seen three 80%+ drawdowns throughout its history and has bounced back from each one stronger than ever before (though it has also never faced a global economic downturn, beyond briefly at the beginning of the pandemic). For many miners, this bear market will mark the beginning of their mining journey, and for some it will signify the very period when their crypto fortune was secured.
Wattum can help new and experienced miners both minimize the downsides and maximize the upsides of the current Bitcoin mining situation. We carry the latest-gen ASIC mining equipment (including the Antminer S19 Pro and WhatsMiner M30S, among many other leading models), with hardware options that can help you stay competitive in a tough Bitcoin mining market. In addition to hosting, management, and buildout services, we also offer mobile mining containers, so you can mine in a location that provides electricity prices that most benefit your operations. Get in touch with a Wattum sales representative to learn more about your Bitcoin mining options today.