In September 2022, Bitcoin (BTC) twice crossed the $20k mark, before falling again. Regardless of the “September effect,” i.e. the month that historically never performs well, the crypto markets are taking a beating due to several external factors. Miners are taking a major hit as profitability tumbles.
According to Bloomberg, Bitdeer Technology Holdings is raising $250 million to acquire assets from troubled miners. Bitdeer is a crypto mining firm led by crypto tycoon Jihan Wu. The firm has already invested $50 million as a junior tranche, and plans to raise another $200 million from other sources.
Bitdeer CEO Matt Kong stated,
“We can buy the cheaper machines and run them in our existing facilities with stable and cost-effective power purchase agreements.”
The availability of cheap machines is a testament to the falling profitability of Bitcoin mining.
Not just that but other Bitcoin (BTC) mining companies also witnessed their stock prices rise, only to drop once again. Yesterday, Hut 8 Mining, Marathon Digital Holdings, and TeraWulf each saw gains between 10% and 11%. However, the surge did not last as they fell to 1.8%, 2.7%, and 5.7%, respectively.
Will Bitcoin (BTC) mining get some relief anytime soon?
Miners have been eager to sell their gear in 2022 for several reasons. Firstly the bear markets have made mining largely less profitable. Secondly, Ethereum’s transition to a PoS (Proof-of-Stake) model removed the need for miners altogether. The same is reflected in GPU prices in second-hand markets. Due to the flow of cheap gear, GPU prices have also gone down.
Moreover, Bitcoin’s difficulty reached its highest in September, while revenues were moving sideways after heading down since last October. The hashrate too is on the rise. This is not the best situation for high profitability.
Furthermore, there is an energy crisis currently looming over the world, particularly in Europe. The ongoing sanctions against Russia, for its invasion of Ukraine, might result in Russia turning off its natural gas supply to Europe. This will consequently lead to a massive spike in energy costs. The same would ideally be reflected in Bitcoin’s price, as energy is the fundamental requirement for mining.