Bitcoin Miners

Nifty News: BTC miners cash $5M on Ordinals, Reddit NFTs get botting backlash and more

Bitcoin transaction fees from Ordinals inscriptions have exploded by 240% over the last month.

Bitcoin (BTC) miners have pocketed over $5 million from creating nonfungible tokens (NFT) inscriptions using the Ordinals protocol.

Transaction fees for Ordinals transactions exploded 240% from $1.5 million on March 10 to 5.2 million by April 12, according to Dune Analytics data.

The rise came on the back of a relatively slow period between Feb. 16 and March 10, from $1 million to $1.5 million. Before that, fees hit the $1 million mark within the first four weeks of the Ordinals protocol launching on Jan 21.

Transaction fees paid for Ordinals inscriptions hit the $5 million mark on April 11. Source: Dune Analytics

Nearly 1.1 million Ordinals have been inscribed on the Bitcoin network, mostly comprising JPEG images and text but also consisting of PDFs, video and audio formats.

Roughly 100 to 500 inscriptions are processed in each Bitcoin block, which usually contains between 2,000 and 3,000 transactions. Block 783,758 on April 3 saw a record 3,785 inscriptions, representing nearly 87% of the entire block.

Reddit’s Gen 3 NFTs plagued by botting claims

Online community platform Reddit launched its third batch (Gen 3) of NFTs on April 12 — a “Futures Realities Collection” of collectible avatars created by over 100 artists.

Reddit explained in its announcement that the artists behind each limited edition Avatar will receive royalties upon each sale, and no cryptocurrency was needed to purchase them.

However, the release didn’t come without issues. Many Reddit users claimed they missed out on the sale because spam bots swooped in almost instantly.

Many also believe the bots were the reason behind Reddit’s NFT shop crashing shortly after launch.

“They didn’t incorporate any type of spam or bot prevention, like a simple captcha. Of course the site got overloaded,” one user wrote, with another remarking there was “no way you guys didn’t even think of stopping bots during this drop.“

Twitter user “Pastel Alpha” tweeted they managed to get “a good amount” of the NFTs “even though the site completely died” and thanked its “bot partners” for helping with its haul.

Reddit previously released a batch of Halloween-themed avatars in October 2022, which was followed by super bowl avatars in February.

Adidas releases first in series of dynamic NFTs

Shoe brand Adidas has released the first leg of its latest dynamic NFT collection, “ALTs by Adidas,” the latest move by the company in its quest to expand its NFT ecosystem.

The dynamic NFTs will evolve based on the decisions and engagement of the owner, according to an announcement on April 11, which described the collection as the “first step” toward owning an “ALTS by Adidas” identity.

The floor price of each Adidas NFT is 0.666 Ether (ETH) ($1,275) and has raked in 351 ETH ($672,000) in trading volume so far. There are now 8,989 owners, 56% of them unique.

Related: NFT warranties can help mass adoption of the technology, says Web3 exec

There are 16,000 items in total, and the creators take a 10% cut of each sale.

The ALTS by adidas NFTs are selling for a minimum of around 0.66 ETH. Source: OpenSea

Collectors must buy and burn phases 1 and 2 of Adidas’ “Into the Metaverse” tokens to receive the ALTS by Adidas NFT.

Be nonfungible, my friend: Bruce Lee enters Web3

An NFT collection commemorating the late kung-fu fighter and movie star Bruce “Little Dragon” Lee has been released by the Bruce Lee Estate in partnership with Shibuya, an NFT-driven video platform.

Plans for the release were revealed on April 11 when Lee’s Twitter account, managed by his family, shared an old video clip of Lee, transforming him into an animated version of himself.

The NFTs sold at a starting price of 0.008 ETH ($15), with 13,907 minted in the first 24 hours, totaling over $205,000, according to its smart contract address on Etherscan.

The NFTs were drawn by artist Emily “pplpleasr” Yang and were designed by Shannon Lee — Bruce Lee’s daughter.

Cover album of “House of Lee: Genesis” NFT. Source: Manifold

Despite it being an “open edition” collection, collectors can only mint a maximum of 100 of the NFTs.

Other Nifty News

NFT marketplace OpenSea launched “OpenSea Pro” last week, a new, specialized NFT marketplace aggregator aimed at serving the needs of professional NFT traders. The service was made possible by OpenSea’s acquisition of fellow NFT aggregator Gem in April 2022.

An NFT trader “fat-fingered” a bid for a free NFT, buying it at 100 Ether ($191,000). The token was part of NFT marketplace OpenSea’s Gemesis NFT collection to commemorate the launch of OpenSea Pro on April 4. Some believe the trader meant to bid the token for $100 instead.

NFT Creator, Emily Xie: Creating ‘organic’ generative art from robotic algorithms

Blockstream raises funds for mining at 70% lower company valuation

CEO Adam Back said the fresh funding will be invested into expanding the firm’s mining capacity.

The depths of a bear market may not be the best time to raise funds but that is exactly what Blockstream is doing.

The crypto infrastructure firm has received fresh funding, but at a much lower valuation than previous rounds, according to a Dec. 7 Bloomberg report.

Blockstream was valued at $3.2 billion when it held its last Series B funding round raising $210 million in August 2021. Today that valuation may have fallen almost 70% to below $1 billion according to the report.

The company, founded in 2014, has raised a total of $299 million in funding over four rounds, according to CrunchBase.

Blockstream CEO and cryptographer Adam Back did not share details of the latest funding round but did reveal that the capital will be invested into expanding the firm’s mining capacity.

“We rapidly sold out all of the capacity and have a big backlog of existing and new customers with miners seeking large-scale hosting with us.”

The firm is working with Jack Dorsey’s Block (formerly Square) to develop a solar-powered Bitcoin mining facility. The mining farm will have 3.8 megawatts (MW) of electrical capacity using Tesla’s solar technology and its Lithium-ion 12 MWh ‘Megapack’, as reported by Cointelegraph in April.

Back acknowledged that BTC prices and mining profi tability were down but added “hosting rates have risen over the last quarters and our mining services are a rapidly expanding, high-margin enterprise business for us.”

Bitcoin miners are currently suffering a triple whammy of high hash rates and difficulty, high energy prices, and low BTC prices. This has caused profitability, or hash price, to fall to near-record lows of around $0.064 per TH/s per day, according to Hashrate Index.

Related: Blockstream CEO Adam Back talks Bitcoin over a game of Jenga

In its monthly newsletter on Dec. 5, Blockstream revealed that its Blockstream Mining Note (BMN) token has earned around 5.37 BTC cumulatively in returns nearly halfway into its three-year term.

BMN is an EU-compliant security token that provides qualified investors access to Bitcoin hash rate at the firm’s U.S. enterprise-grade mining.

The firm has also been promoting a new limited edition ‘Jade Transparent’ hardware wallet claiming that it is “hodling our Bitcoin into the 2090s and beyond.”

Bitcoin miners ‘next trigger’ for BTC price crash as outflows hit multi-month highs

Miners face an impossible situation if prices stay this low, which could result in a sell-off accompanied by a BTC price macro low.

Bitcoin (BTC) miners could form the next BTC price “trigger,” research warns as withdrawals intensify.

In a Quicktake post for on-chain analytics platform CryptoQuant on Nov. 10, contributor MAC.D suggested that miners could soon face “bankruptcy.”

Research: Network conditions “will strangle” miners

After BTC/USD fell 20% in a matter of days, miners began operating at a higher cost than the block subsidy and transaction fees they earned.

The result is mining rigs being idled and miners selling BTC to cover expenses.

“BTC security is at an all-time high, but its mining volume is gradually decreasing. This will strangle the miners,” MAC.D explained.

He pointed to outflows from miner wallets passing 5,400 BTC for Nov. 9 alone, something which “can be interpreted as increased selling pressure.”

Going forward, the situation could worsen should major mining firms end up selling stored BTC en masse as a way to pay obligations.

“There is already a lot of news that mining companies listed on NASDAQ cannot pay their debts. If they go bankrupt, there will be a situation where they have no choice but to sell BTC,” the post continued:

“Therefore, it is necessary to keep a close eye on the miner withdrawal table, and if the amount of miner withdrawal increases, BTC is likely to fall further.”

A silver lining could nonetheless come shortly after such a major capitulation. Historically, there has been a correlation between miner wipeouts and BTC price bottoms.

“But the bankruptcy of past miners has formed the bottom of the BTC,” the post concluded:

“So when they go bankrupt, they have to use it as an opportunity to buy BTC.”

Bitcoin miner outflows chart. Source: CryptoQuant

Mining costs outweigh gains

Continuing the theme, journalist Colin Wu, meanwhile, noted that even the most popular Bitcoin mining machines were now unprofitable.

Related: FTX and Binance’s ongoing saga: Everything that’s happened until now

“As BTC has fallen by 20% in the past 7d, F2POOL shows that bitcoin mining machines such as Whatsminer M30S and Antminer S17Pro have fallen below the shutdown price,” he tweeted on the day, linking to major mining pool f2pool:

“Top bitcoin mining machines such as Ant S19 XP also account for 56% of electricity bills.”

Charles Edwards, CEO of asset manager Capriole, also flagged the untenable cost of production versus miners’ income at current prices.

“Many Bitcoin miners are now turning their rigs off,” he commented on a chart.

Bitcoin mining production cost annotated chart. Source: Charles Edwards/ Twitter

“Bitcoin’s electrical cost has just been breached for the 2nd time only in 5 years. The electrical bill for the average miner is now greater than the income earnt.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin miner profitability under threat as hash rate hits new all-time high

Analysts say Bitcoin miners’ worst days are probably behind them, but the network’s soaring hash rate and the uptick in difficulty are weighing on profit margins.

The Bitcoin hash rate hit a new all-time high above 245 exahashes per second on Oct. 3, but at the same time, Bitcoin (BTC) miner profitability is near the lowest levels on record. 

With prices in the low $20,000 range and the estimated network-wide cost of production at $12,140, Glassnode analysis suggests “that miners are somewhat on the cusp of acute income distress.”

Bitcoin network hash rate. Source: Hashrate Index

Generally, difficulty, a measure of how “difficult” it is to mine a block, is a component of determining the production cost of mining Bitcoin. Higher difficulty means additional computing power is required to mine a new block.

Utilizing a difficulty regression model, the data shows an R2 coefficient of 0.944, and the last time the model flashed signs of the miners’ distress was during BTC’s flush out to $17,840. Currently, it hovers near $18,300, which is not far from the price range seen in the past two weeks.

Bitcoin difficulty regression model. Source: Glassnode

The hash rate hitting a new all-time high effectively means that miner margins will be further squeezed. Outfits that are unprofitable can either mine at a loss, assuming that BTC’s future price will eventually make up for the cost difference, or they can unplug and wait until either the difficulty drops or energy costs improve.

With the recent rise in hash rate, the difficulty is also likely to rise in the next week, with estimates pointing to a 6% to 10% adjustment.

Bitcoin network hash rate (left) and projected difficulty adjustment (right). Source: BTC.com

Shown below are estimations of miner profitability assuming an electricity rate of $0.08 kilowatts per hour.

Bitcoin ASIC profitability. Source: DxPool

Depending on a miners’ capital costs and operational costs, the profit stats above clearly illustrate the tightrope some miners are attempting to balance on at the moment.

Despite the stress on profitability, independent market analyst Zack Voell suggested that miners with healthy balance sheets are constantly looking for ways to expand their operations and the recent surge in hash rate could be related to Bitmain’s newest S19 XPs coming online.

Is Bitcoin in the clear?

What investors really want to know is whether or not Bitcoin price is in the clear or whether there is an elevated risk of another sell-off driven by miner capitulation.

According to Colin Harper, the head of research at Luxor Technologies:

“Miners are still selling in the current environment (for example, Riot sold 300 BTC last month and Bitfarms sold 544 BTC). By my estimation, we’re more likely to be driven lower by general selling, not miner selling particularly. If BTC price does go to $10,000, in addition to more miners capitulating via BTC sales, there would also be a lot of rigs flooding the market. We are not trying to single out Riot or Bitfarms, these are just the current updates we have, besides Hut 8, which didn’t sell any BTC.”

On the other hand, Joe Burnett, the head analyst at Blockware Solutions, said that the bulk of miner selling has likely passed, which reduces the possibility of another capitulation level sell-off.

Burnett told Cointelegraph:

“I think the small miner capitulation Bitcoin experienced this summer knocked out some weak and overleveraged players. I do not think we will see another significant drop in hash rate without Bitcoin making new lows below $17,600. It doesn’t mean individual weak miners won’t drop off this year and next, but the new-gen rigs getting plugged in will likely be enough to keep hash rate trending upward.”

When asked about the surge in hash rate placing pressure on higher difficulty adjustments and the knock-on-effect on miner profitability, Burnett said:

“Individual weak players may drop off and get knocked out, but it won’t be a significant and sudden ‘miner capitulation’ without a drop in BTC price. Margins are definitely tight.”

Glassnode’s model of the “implied income stress of the Puell Multiple, with the explicit stress observation of the Difficulty Ribbon Compression” recently exited the zone where “miner capitulation is statistically likely,” suggesting that another miner-driven sell-off is unlikely at the moment.

Bitcoin miner capitulation risk. Source: Glassnode

The analysts, however, were careful to stress that the aggregate size of Bitcoin held by miners is near 78,400 and any sharp downside move in BTC price could trigger selling from distressed mining outlets.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Could Bitcoin miners’ troubles trigger a ‘death spiral’ for BTC price?

Forced selling from Bitcoin miners raises concern about BTC price, but the use of renewable energy and the oil and gas industry’s growing interest in BTC are longterm positives.

A July 9 post by @PricedinBTC on the “cost to mine Bitcoin” in the United States gathered the crypto community’s attention, especially considering the recent headlines that BTC miners have made. The crypto bear market and growing energy costs have caused a perfect storm for the mining sector and this has led some companies to lay off employees and others to defer all capital expenditures. Some went as far as raising concerns of Bitcoin miners hitting a “death spiral.”

However, Raymond Nasser, the CEO of Arthur Mining, a professional mining company operating in the United States told Cointelegraph that their margins don’t full concur with the data from @PricedinBTC.

Arthur Mining’s current capacity is 25 megawatts (MW) and the company focuses on environmentally friendly energy sources. At first, one could dismiss their numbers as listed companies like Marathon Digital Holdings have 300 MW plants, but these rely on the traditional grid energy — even if a portion of the power originates from hydro-electric plants.

To achieve the best environmental, social and governance (ESG) practices, the smaller scale mining operations utilize undervalued flare and stranded gas from the oil and gas industry. Their secret is mobile Bitcoin mining facilities, tapping greener, more efficient and more profitable energy sources compared to traditional solutions.

Regarding the $16,000 production cost for miners, Nasser said:

“These diagrams are extremely subjective. The biggest new projects in the industry are looking for off-grid solutions, and this diagram represents some of the most expensive on-grid energy costs used in urban areas. Our all-in energy costs are lower than $0.02 kWh in two different U.S. States.”

Electricity costs have doubled in the past year

Data from QuickElectricity shows that from March 2022 commercial electricity costs per kilowatt/hour (kWh) ranged from $0.08 to $0.09 in the U.S. state of Idaho, Utah, Virginia, Texas, Nevada, North Dakota, Nebraska and Oklahoma.

One of the strong points of the Bitcoin network is that it prioritizes efficiency, meaning, the labor intensive production process will always seek out the lowest operational costs and shift toward that. ASIC mining equipment is mobile, but more importantly, there is optionality for other energy sources. For example, these machines can be installed in containers, shipped to offshore oil and gas structures, and work with oscillating power sources.

To date, Upstream Data, a Canada-based manufacturer of Bitcoin mining data centers, builds portable Bitcoin mining equipment and infrastructure for natural gas without the need for any pipelines or midstream facilities. After deploying over 180 of these data centers, it is becoming clear that this activity is becoming mainstream.

Earlier this year, CNBC explored how renewable energy is used in the Bitcoin mining process and to date, Giga Energy Solutions, a natural gas Bitcoin mining company, have signed deals with more than 20 oil and gas companies, four of which are publicly traded.

Higher interest rates and Bitcoin’s collapse is hurting BTC miners

Regardless of the energy source, miners have been struggling with their balance sheets. Besides the impact of lower Bitcoin prices, financing has been a major hurdle across the industry. A July 7 Cointelegraph report examined how industrial-size Bitcoin miners owe some $4 billion in loans and some have been forced to liquidate their BTC holdings to cover capital and operational costs.

But not every mining company has access to traditional long-term bank financing. Thus, those firms created a riskier debt structure by offering their miners and infrastructure as collateral. As Bitcoin price plunged, so did the mining equipment prices, and in turn, worsening their financing conditions when they needed the most.

Blockware Solutions analyst Rich Ferolo expressed his concerns to Cointelegraph on June 28:

“For the s17s [ASIC miner], at $0.07 per kilowatt, BTC needs to be at around $18,000…. you’re going to see a lot of capitulation, insolvency and excess machines… It’s more about survival of the fittest.”

According to Nasser:

“We have always mitigated our convexity exposure by immediately reinvesting or liquidating our bitcoin balances on a weekly basis. We understand that with 70%+ ebitdas and high efficiency in most cases, being overly greedy by holding Bitcoin reserves can break your operation and cost you jobs, like we have seen in the past month”.

The mining industry has a problem, but its impact is limited

The industry clearly has a problem, but this could simply be a reflection of its infancy. Still, the impact of miners selling more Bitcoin than they have mined over the past couple of months may be creating additional pressure on the price of BTC.

This never-ending cycle reinforces the “death spiral” theory, but this oversimplification fails to consider that miners simply shut down their machines below a certain price threshold and that many will locate to areas with cheaper electricity costs or even seek out renewable options.

Although lowered mining activity effectively poses a short-term risk as the network becomes less secure, this risk is overstated because Bitcoin’s difficulty adjustment increases operational miners’ profitability. In short, the Bitcoin mining business does not pose a systemic risk for BTC price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.