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BT Daily New: Bitcoin Mining 2022 Review—A Tough Year for Public Miners

BT-miners

1. Bitcoin Mining 2022 Review: A Tough Year for Public Miners

The 2022 yearly average hashprice was $123.88/PH/day, a steep decline from the $314.61/PH/day average in 2021. The steep decline was driven largely by the onset of Bitcoin’s bear market but also by an average 16% increase in energy costs across the United States in 2022.

Rising energy costs also caused the cost of hosting services to spike. Whereas a “reasonable contract” may have offered prices at $0.05-$0.06/kWh before 2022, it’s now “not uncommon” to see rates around $0.08-0.09/kWh. “Anything below $0.075/kWh is considered “a steal” given market conditions,” the report continued.

Public Bitcoin miners have suffered major losses within this environment, with most pure-play Bitcoin mining stocks plummeting over 90% in 2022. One of the world’s largest miners – Core Scientific (CORZ) – fell 99% as worrying rumors swelled about the firms solvency, culminating in an official bankruptcy filing towards the year’s end.

The second-worst performing mining stock was Greenidge Generation (GREE), which fell 98% as it struggled to pay off high-interest debt collateralized with its own ASIC machines.

Other miners like Iris Energy have also suffered under the weight of such loans, with Iris being forced to slash its mining capacity to pay back its debt to NYDIG in November.

In 2022, Bitcoin’s overall hashrate rose by another 41%. This, too, was largely driven by public miners, which increased their cumulative hashrate by 59% versus a 19% increase among their private counterparts.

Finally, 2022 marked a year in which Bitcoin mining became “the only proof of work game in town.” Its only major rival, Ethereum, changed its consensus mechanism to proof of stake in mid-September, thus killing Ethereum’s mining industry with one upgrade.

2. Difficulty hits new all-time high

If Bitcoin’s price recovery were not enough to get bulls excited, its network fundamentals tell a similarly encouraging story.

Roughly in step with the weekly close, network mining difficulty increased by over 10%, marking its biggest uptick since last October.

The move has obvious implications for Bitcoin miners, and suggests that the ecosystem is already benefiting from higher prices.

Miners had already been slowing the pace of their BTC reserve sales in recent weeks, while the difficulty increase reflects competition for block subsidies returning to the sector.

Over the past week, however, miners’ balances have decreased in response to Bitcoin’s rapid price rise. They stood at 1,823,097 BTC as of Jan. 16, data from on-chain analytics firm Glassnode shows, marking one-month lows.

Despite this, difficulty has now erased its FTX reactions, and set a new all-time high in the process.

Bitcoin is in the process of retesting the estimated average cost of production price for Miners,” Glassnode additionally noted last week, before the majority of the gains came.

It added that “breaking above this level like offers much needed relief to miner incomes.”

3. Will China trigger the 2023 crypto revival?

The cryptocurrency market has performed well in the first two weeks of 2023. Most tokens are trading higher than they were by the close of 2022. The global market cap has also reclaimed the $1 trillion mark.

The recovery coincides with the reopening of China after three years of strict COVID restrictions. The Xi Jinping administration is easing up on its strict COVID policies and adopting market-friendly rules. The changing climate is fuelling speculations over whether the Chinese government will also shift its crypto policy.

Hong Kong did not ban cryptocurrencies when China was doing so. Instead, Hong Kong has positioned itself as a hub for digital assets. There have been speculations that China and Hong Kong will create a connect program similar to the one in the stock market, allowing Chinese traders to access the crypto market through Hong Kong.

However, many do not believe that such a move will happen soon. Moreover, the regulatory climate for digital assets has rapidly changed. The fallout of FTX and several other crypto firms have made governments more watchful over the crypto markets, which could be one of the key hindrances to the return of digital assets to China.

Nevertheless, even a partial ban on cryptocurrencies in China could be good for the value of these digital assets. Right now, the country has imposed a total ban on the crypto space, even cracking down on miners that are still operating mining rigs.

The ban on digital assets led to China losing its top spot as the world’s largest Bitcoin miner. The US now stands as the largest Bitcoin miner by hash rate as miners migrated to the country. As miners shut their doors in China, so did crypto exchanges, including Huobi. Huobi was the largest crypto exchange in China before the ban.

Justin Sun, the founder of Tron and a member of the Huobi Advisory Board, has celebrated the reopening of China’s economy, pledging that he would be a “long-term partner in China’s success.” His tweet did not mention digital assets, but it triggered chatter of crypto’s re-entry to China.
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