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BT Daily News: Bitcoin Mining Is Booming Despite Market Headwinds, and more


1. Bitcoin Mining Is Booming Despite Market Headwinds

The short answer is that most of the over-leveraged miners have already dropped off the network and only the quality and low-cost miners remain,” Scott Norris, co-founder of Bitcoin miner LSJ Ops, told Decrypt. “They have seen many of these bear markets before and have a model that sustained them through it plus a low energy cost. Therefore we aren't seeing the same amount of network drop-off as we have in the past.”

And while troubled operations like Argo and Compute North are making headlines, they haven’t actually switched off any machines yet and are still profiting, albeit with slimmer margins.

While Bitcoin may be in a bear market right now, energy isn't.

Between 2021 and 2022, industrial electricity prices ballooned 16% since last year while the price of Bitcoin has almost halved from this time last year.

So, what price would Bitcoin need to be at for mining to stop being profitable? Well, it’s complicated.

At current levels, a miner that is running an S19j Pro that produces a hash rate of 100 terahashes a second is currently breakeven at $0.096/kWh power costs,” said Harper. “If Bitcoin's price was cut in half from here, that breakeven would then become $0.048/kWh."

Basically, the only way for Bitcoin mining to no longer be profitable is if it were to hit zero.

"Someone, somewhere has power cheap enough to mine BTC even under the most nuclear bearish conditions,” he concluded.

2. Going Nuclear: Bitcoin Mining’s Potential Energy Future

Though the prevalence of bitcoin miners using nuclear energy at scale could take years to materialize, several players in the space are bullish on the prospect.

Volatility around bitcoin and the general slow pace of movement in an often risk-averse power industry could serve as barriers though, industry participants said.

Bitcoin miner TeraWulf recently revealed it is setting up operations at a nuclear energy-powered data center in Susquehanna, Pennsylvania, as part of a partnership with Talen Energy forged in 2021.

TeraWulf is not the only miner bullish on using nuclear power.

While Marathon Digital has not yet made nuclear power a major part of its strategy, it sees the energy source as a potential key part of the future. The company doubled its hashrate in 2022 to 7 EH/s and expects to have 23 EH/s of capacity installed near the middle of 2023.

When we, and I think a lot of other bitcoin miners, realized how much stranded or wasted wind and solar [energy] there was…that became a pretty good target for bitcoin miners,” said Charlie Schumacher, Marathon’s vice president of corporate communications. “Because you’re looking for stranded, wasted energy; you don’t want to compete with consumers for electricity.

So I think that was low-hanging fruit initially, but long-term nuclear makes a ton of sense,” he told Blockworks.

UK-based Lake Parime, a company focused on transforming energy into zero-carbon computing power, revealed in November that it launched a site in Ohio using 100% nuclear energy.

Khan said the drastic fluctuating margins of the bitcoin mining industry through market cycles has turned off some nuclear power executives. Others in the power industry aren’t sold on bitcoin as an asset more generally, he added.

Still, Khan said he believes as the bitcoin mining space consolidates and matures, it has a place in the nuclear energy segment.

We would love for it to be the majority,” he said of nuclear energy as a power source for TeraWulf long term. “It’s a zero-carbon base-load resource, so in terms of how it fits into what we’re doing, it’s a wonderful resource to have.”

3. Bitcoin Miner Gryphon to Go Public Via All-Stock Merger With Cannabis Firm Akerna

Private bitcoin miner Gryphon Digital plans to go public with a merger with publicly traded cannabis company Akerna (KERN) in an all-stock deal.

The new company will assume Gryphon's name and be headquartered in Las Vegas, Nevada, after the deal closes, according to a statement. The miner's current equity holders are expected to own about 92.5% of the new publicly traded entity, while Akerna's shareholders will own about 7.5%, the statement added.

The CEO of Gryphon, Rob Chang, will be the new CEO of the publicly traded company. The CEO of Akerna, Jessica Billingsley, will be on the board of the new company, and six of the remaining seven members will be designated by Gryphon.

Akerna's top three investors include Vanguard (2.6% ownership as of Sept. 2022), Perkins Capital (2% as of Dec. 2022) and BlackRock Fund Advisors (1.2% as of Sept. 2022), according to FactSet data.

The deal comes after Gryphon terminated its drawn-out process to go public via a reverse merger with publicly traded data management firm, Sphere 3D (ANY). The proposed deal was announced in 2021, and the closing of the deal was pushed back multiple times due to the complicated regulatory approval process before the deal was eventually terminated.

Gryphon also found itself in the middle of controversy last year after Sphere 3D signed a $1.7 billion deal with unknown mining-rig manufacturer NuMiner. The deal came under serious scrutiny by the mining community after several red flags were raised about the viability of NuMiner.

Gryphon, which started mining operations in September of 2021, has a potential revenue-generating profile of 1.1 exahashes per second (EH/s) on a cost basis of 0.75 EH/s, according to the statement.

The shares of Akerna fell about 15% on Friday, trading around $1.51 each. Akerna has a market capitalization of about $8 million, according to TradingView.
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