Bitcoin price plunges, virtual currency miners face piling up difficulties

Last year, when the price Bitcoin As high as 68,000 USD, cryptocurrency miners have made huge profits. At that time, many decided to expand their activities aggressively, preparing for an even more vibrant 2022 market.

Suddenly, a storm hit. Over the past few months, the crypto market has been on a downward slide with the Bitcoin price hovering around $30,630. At the same time, electricity prices around the world skyrocketed amid the Russia-Ukraine conflict.

That’s a big problem for Bitcoin miners, who use power-hungry computers to mine cryptocurrencies (ASICs for short).

“Energy can account for up to 90%-95% of the total cost of a Bitcoin miner,” said Valery Vavilov, CEO (CEO) of crypto mining company Bitfury in Europe.

Daniel Jogg, CEO of Enerhash – a company that operates Blockchain data centers, confirmed that some areas in Europe are currently witnessing a dizzying increase in energy prices. “The energy cost to mine one Bitcoin can be as much as $25,000. Bitcoin mining is currently almost unprofitable” – CEO of Enerhash revealed.

“As more and more Bitcoin miners join the network since last summer, this reduces the output of each Bitcoin miner. In short, miners are paying more but mining it. less Bitcoin and their Bitcoin is also less valuable,” said the person in charge of crypto mining company Luxor Mining.

The piling up difficulties are besieging the Bitcoin technology industry. Photo: Wired

In fact, global Bitcoin miners are suffering from reduced profits, even when using the most advanced mining rigs.

“If the situation does not improve, it could cause instability in the Bitcoin mining sector worldwide” – page Wired identify.

In the two years before the crisis hit, Bitcoin miners scrambled to buy ASICs to earn more Bitcoin. However, the value of ASICs is now much lower than when Bitcoin peaked, as ASIC prices are often correlated with Bitcoin’s price.

Charlie Schumacher, a spokesman for Marathon, one of the largest cryptocurrency miners in the US, said they will move to a “shared asset model”. This model has a partnership with hosting services rather than building its own crypto mining rigs, protecting the company from the problems the industry is facing.

According to observers, Bitcoin miners mainly borrow money to buy ASICs. “That debt burden, coupled with the drop in Bitcoin prices and expensive energy, has severely impacted profitability,” said Jurica Bulovic, head of mining at Foundry. of companies”.

The question is whether that spiral will begin to worry lenders. Over the past two prosperous years, a number of crypto miners have borrowed money based on their Bitcoin reserves. They even enter into a “device-secured loan” contract, where the loan is collateralized by the cryptocurrency mining rigs themselves.

Now that the price of both Bitcoin and ASIC has gone down, that collateral has lost value.

“If miners become insolvent, the hardship could spread to other parts of the industry. For example, lenders will suffer a heavy hit in revenue as the value of collateral assets increases. mortgage has decreased,” emphasized expert Bulovic.