Bitcoin miners diversify revenue streams, and more

09/27/2023 0 Comments

1. Bitcoin miners seen exploring ways to diversify revenue streams

Bitcoin miners are exploring ways to diversify their business models as they anticipate digital asset volatility ahead of next year’s halving, according to an analyst.

Compass Mining analyst Anthony Power noted that multiple headwinds are causing some miners to explore the option of repurposing part of their operations to run data centers. The pivot is a strategic move aimed at tapping into the expanding market driven by the increasing demand for GPU processing power in artificial intelligence applications, such as ChatGPT.

“If you are a bitcoin miner and mining in a location were you get really cheap energy, these operators are now thinking, if the BTC price drops, I need revenue coming in that is not impacted by the bitcoin price,” Power told The Block.

“Bitcoin mining operators, like Hut8, Hive Digital and Iris Energy are diversifying their revenue by purchasing GPUs or repurposing redundant GPUs that were used for mining ether when it was proof of work,” he added, stating that bitcoin mining operations have all the fundamental infrastructure to run efficient data centers such as cooling systems, security and access to cheap energy.

Hut8, Hive Digital and Iris Energy did not immediately respond to requests for comment from The Block.

Bitcoin miners face multiple headwinds

Recent data shows the bitcoin mining hashrate at a new all-time high, forcing the network to up its difficulty level. According to Coinwarz data, the bitcoin difficulty has risen by 5.5% over the past week after shooting up 9.1% over the past 90 days.

Average electricity costs needed to mine a single bitcoin, meanwhile, is rising in certain regions, squeezing margins even more. Miners are also looking ahead to the bitcoin halving, estimated to occur in April next year, which will slash block rewards from 6.25 bitcoin per block, to 3.125 bitcoin per block.

These headwinds could be playing on investor confidence when appraising bitcoin mining stocks, and big mining operators such as Marathon Digital and Riot Platforms have seen their stock prices fall steeply since mid-July. Valkyrie Bitcoin Miners ETF, which provides exposure to the bitcoin mining industry, has declined 23% since the beginning of this month.

It’s worth noting, however, that these losses come after several months of consistent gains during the first six months of the year.

Miners are relocating to source cheaper energy

According to Power, mining companies are also increasingly looking to hedge their hash rate or energy costs by securing fixed-price energy deals and using energy strategies to determine where and when it’s profitable to mine.

“Some North American miners are relocating to sites in Iceland and Sweden, where there is an abundance of hydro and geothermal power,” Power added.

The world’s largest cryptocurrency by market capitalization traded mostly flat on Monday, falling around 1% in the past 24 hours to $26,333, at 3 p.m. ET, according to CoinGecko.

2. Cloud Mining vs Home Mining: Which Is More Profitable?

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The process of adding transactions to the Bitcoin blockchain, a decentralized, open-source database of all Bitcoin transactions, is known as mining. Proof-of-work (PoW) puzzles are challenging mathematical problems that miners employ to validate transactions and add them to the blockchain. In exchange, miners get freshly created BTC as payment for their labor. A hash is a challenging mathematical puzzle that must be solved using specialized gear and software in order to mine Bitcoin. The first miner to figure out the riddle receives fresh Bitcoins in addition to the transaction fees related to the transactions included in the block.

Due to the fact that the riddles have grown increasingly complex over time, mining Bitcoin demands a large amount of computer power and energy. It becomes harder and less profitable for individual miners to join in the network as the number of miners on the network grows and the complexity of solving the problems climbs. More sophisticated hardware, such as application-specific integrated circuits (ASICs), and energy-efficient hardware, such as specialized graphics processing units (GPUs), are being employed by miners as the level of mining difficulty increases. Overall, mining bitcoins is a cutthroat business that only turns a profit when the value of one bitcoin is high enough to offset the expense of equipment and power and still leave a profit.

Home bitcoin mining may not be as lucrative as it once was due to the large increase in mining difficulty. To mine Bitcoin at home, one requires a strong mining gear, affordable electricity, and a dependable internet connection. In some places, the price of power might be significantly higher. Electricity costs, for instance, can be as low as $12.5 per kilowatt-hour in the United States, where the majority of Bitcoin mining occurs. In comparison, power costs in nations like Germany or Denmark may reach $37.5 per kWh, making the cost of mining bitcoin substantially higher.The effectiveness of the mining equipment can also affect the price of power. The cost of power as a whole can be significantly impacted by the energy efficiency of various equipment. When estimating the cost of power for Bitcoin mining, it’s critical to take the equipment’s efficiency into account.

When mining cryptocurrency, cloud mining refers to using another company’s facilities that have been hired out. The equipment may be put anywhere in the world, making it possible for miners to instantly access them online via the management panel with a reliable internet connection. This is cloud mining’s most outstanding feature. The corporation assumes complete responsibility for the maintenance and deployment of the mining facilities, so the users don’t need to bother about anything else. The PoW (Proof-of-Work) census algorithm-based cloud mining alternative is presently accessible for cryptocurrencies like Bitcoin. The supplier must provide consumers pre-set charge and price plans in order for bitcoin mining to take place. The hashing power may be verified by the miners.

Here are eight compelling arguments for why cloud mining is a successful cryptocurrency mining platform, as was previously said. Cloud mining is the best choice for you if privacy is your top priority. It delivers the best and most cutting-edge privacy measures that safeguard your assets and never, ever divulge your info. You do not need to be concerned about the cost when it comes to cloud mining because they charge a tiny sum. Cloud mining is the best choice if your main goal is to generate a profit with the least amount of cost.The main benefit of adopting cloud mining is that because it is driven by blockchain technology, your transactions will never be falsified. You may access cloud mining on practically any mobile device (android and iOS), allowing you to do so while on the road.

In 2023, which is the focus of this piece, cloud mining will continue to be the greatest way to generate income without having to spend money on equipment and related expenses. on addition to the potential for financial gain, mining on the cloud platform significantly lowers risk.

3. Texas Is Now the Top US Bitcoin Mining Spot: Foundry

The Lone Star State of Texas is now the number-one U.S. state for Bitcoin mining, dwarfing rivals by hosting a whopping 28.5% of the nation’s hash rate.

The estimate comes from Foundry, the world’s largest Bitcoin mining pool, which aggregated and published data sourced directly from its users. Back in 2021, the firm estimated that the Texas hash rate share was 8.4%.

While still comparatively high, it was still surpassed at the time by states like New York (9.5%) and Georgia (34.2%), whose respective shares have fallen to 8.8% and 9.6%.

Georgia’s steep drop was partly due to a large miner from the 2021 sample not participating in the 2023 map—but was also partly driven by growth in Texas. Meanwhile, New York’s mining growth has been stagnant since a memorandum against fossil fuel-powered miners took effect last year.

Other states like Nebraska, North Carolina, Kentucky, Oklahoma, and Washington also experienced major drops.

On Texas’s part, the state has made mining attractive through government incentives designed to encourage miners to help stabilize the electricity grid. When stressed to its peak during intense summers and winters, the grid operator, ERCOT, asks miners to stop operations and leave available power for citizens in their homes, then compensates firms later for their participation.

In a press release earlier this month, Riot CEO Jason Les noted that the state’s power credits “significantly lower Riot’s

cost to mine Bitcoin.” The firm now has major expansion plans in Navarro and Milam counties, after rival Cipher Mining purchased 11,000 mining machines for its Texas facility in May.

Foundry has also expanded its own operations within Texas, acquiring mining sites from the bankruptcy estate of Compute North, a mining firm that collapsed due to bear market pressure last year.

Since Foundry’s data was sourced in July, a period of major curtailment for the region’s miners, the company now believes its 28.5% estimate may be low.

The University of Cambridge also publishes public data on Bitcoin hash rate and electricity consumption, though its mining map hasn’t been updated since January 2022. The current version shows Texas holding just 11.2% of US hash rate.

In an email to Decrypt, Cambridge Research Lead for Digital Assets Climate Impact Alexander Neumueller said his team hopes to update their mining map by “early next year,” but could not provide a definitive date.

“When we publish an update, what is very important to us is to ensure a large enough sample size and no single pool constituting an overly large part of the sample,” he explained. So far, Cambridge has onboarded ANTPOOL to its list of collaborating pools—the second largest pool after Foundry.

“Personally, the large increase in Texas’s share does not come as a surprise given conversations I have had with industry stakeholders,” he added. “I expect that the landscape today looks noticeably different than our last data point in January 2022, particularly with respect to China and Kazakhstan.”