Hashrate

Riot Platforms buys $291M in BTC rigs as miners rake it in from Ordinals

It adds to a prior agreement in which Riot bought 33,280 miners from MicroBT. The term sheet was also updated, allowing Riot to buy another 265,000 miners in the future.

Bitcoin (BTC) miner Riot Platforms is buying 66,560 mining rigs from manufacturer MicroBT in one of its largest expansions of hash rate in the firm’s history ahead of the Bitcoin halving scheduled for April 2024.

The additional purchase agreement totaled $290.5 million, Riot stated in a Dec.

The right-to-purchase option was included in Riot’s initial agreement with MicroBT when it agreed to buy 33,280 machines from MicroBT in June.

Riot’s CEO Jason Les said the purchase order is “the largest order of hash rate” in the company’s history and hopes the updated agreement will strengthen Riot’s mining performance further.

Over 48,000 or 72% of the new machines will be MicroBT’s latest model, the M66S, which has a hash rate of 250 terahashes per second (TH/s), while the remaining machines will consist of the M66 (14,770) and M56S++ (3,720) models, Riot noted.

Altogether, the 66,560 miners will add 18 exahashes per second (EH/s) to Riot’s operations.

Purchase summary of Riot’s latest deal with MicroBT.

Read more

Marathon Digital posts quarterly record of 2,195 Bitcoin mined in Q1

With a new quarterly production record, Marathon Digital is now on track to meet its mid-year target of 23 exahashes.

Bitcoin (BTC) mining firm Marathon Digital has reported a quarterly record of 2,195 BTC mined over the first quarter of 2023, currently worth around $62 million.

Marathon reported in an April 3 update that the 2,195 mined BTC is a 74% increase from the first quarter of last year and a 41% increase from Q4 2022.

It comes on the back of the miner increasing its operational hash rate by 195% from Q1 2022.

Marathon also recorded a monthly record of 825 BTC mined in March — currently valued at around $23.3 million — and marked a 21% production increase from February.

In a statement, CEO Fred Thiel said Marathon made “notable progress” on executing its two primary initiatives for 2023 — to energize its previously purchased mining rigs to reach 23 exahashes by the end of the second quarter and to optimize performance.

The firm is now exactly on target, having increased its operational hash rate from 7.0 exahashes on Jan. 1 to 11.5 exahashes as of March 31.

Marathon’s management attributed the increase in efficiency to it bringing online 25,900 Bitcoin miners based in various facilities in North Dakota, bringing its fleet to 105,200 mining rigs as of April 1.

Marathon explained its operational improvements cleaned up part of its balance sheet by wiping out $50 billion in debt in addition to repaying its loan back to the now-failed Silvergate Bank:

“We reduced our debt by $50 million and increased our unrestricted Bitcoin holdings by 3,132 Bitcoin after we prepaid our term loan and terminated our credit facilities with Silvergate Bank.”

The firm finished the quarter with approximately $124.9 million in unrestricted cash and cash equivalents, and 11,466 BTC, which equates to over $450 million.

Marathon noted the figures have not been audited.

Marathon’s figures show a stronger first quarter after tough market conditions in 2022. Source: Marathon Digital

Related: Bitcoin ASIC miner prices hovering at lows not seen in years

Marathon expects operational efficiencies to continue having purchased a new batch of Antminer S19 XPs Bitcoin mining rigs that are said to be nearly 30% more efficient than the Antminer S19 Pro.

Once those miners are installed approximately 66% of Marathon’s hash rate will come from the S19 XPs, it said.

The design of S19 XPs has, however, been criticized by fellow Bitcoin mining firm Compass Mining.

In a March report the firm identified “three flaws” of the new S19s which may result in the mining rig overheating, or in some cases, shutting down completely.

Magazine: Hodler’s Digest: FTX EU opens withdrawal, Elon Musk calls for AI halt, and Binance news

Sub-$20K Bitcoin price puts BTC miner profits under pressure as hash rate soars

A soaring hash rate, high electricity costs and BTC price hovering under $20,000 for months are complicating matters for Bitcoin miners.

October witnessed a surge in Bitcoin’s hash rate, which is pushing the metric to a new high of 245 exahashes per second. These changes led to a sharp decrease in the hashprice, resulting in a drop in the profit margins for Bitcoin (BTC) miners and reaching a low of $66.8 per petahash on Oct. 24.

According to Luxor Technologies, “hashprice” is the revenue BTC miners earn per unit of hash rate, which is the total computational power deployed by miners processing transactions on a proof-of-work network.

Bitcoin Hashprice Index. Source: Luxor Technologies

Not only has volume been inconsistent, but the Bitcoin hash rate increased last week to an average of 269 EH/s. This means that the network’s difficulty has been rising since July 2022.

Bitcoin market price vs. Bitcoin difficulty. Source: Blockchain.com

The expansion of mining operations, which creates miner competitiveness; the increased use of ASIC miners, which are more efficient than their alternatives; and the Ethereum Merge have led some Ethereum mining firms to fill empty rack space from non-operating Ether (ETH) GPU miners with BTC-specific ASIC miners.

Consequently, the surge in the hash rate resulted in an adjustment of the Bitcoin difficulty at a time when BTC’s price was dropping. As expected, after the hash rate spike and difficult increase, the hashprice plummeted to $0.0657 per terahash per day, thereby reducing the level of profit.

Bitcoin price vs. hash rate. Source: Glassnode

Increase in mining costs translates to compressed profits

A contributing factor to the depressed profit level is the general rise in BTC mining costs. For example, there has been a sharp increase in the price of electricity in the United States. From July 2021 to July 2022 alone, the price of electricity increased by 25%, from $75.20 to $94.30 per megawatt hour. Energy prices also tend to increase in winter, as people need to heat their homes. The Bitcoin mining industry is already seeing a rise in mining in Kazakhstan due to affordable energy.

Bitcoin miners face other rising costs, such as hosting fees, acquiring miners and installing or upgrading cooling systems. During the 2020–2021 crypto bull market, Bitcoin mining companies took out loans when BTC and equipment prices were much higher, meaning the interest on existing debts themselves could hurt newer and overleveraged mining firms.

It is clear that the increase in hash rate and Bitcoin difficulty, as well as the decrease in hashprice, is leading to compressed profit margins. The following graph shows a decrease in profits in a landscape where the hash rate, difficulty and the cost of electricity continue to rise.

Mining expansion plans for major public BTC miners. Source: Luxor

If the hash rate continues to increase amid a falling hashprice, the profit margin will continue to decrease, possibly leading some mining firms to close up shop permanently.

One possible outcome is that lean (cooler balance sheets) mining firms like Marathon may be able to purchase liquidated equipment and rack space from bloated mining companies that fail.

Mining firms that are staying lean while attempting to scale may prove victorious. Mining companies such as Core Scientific, Marathon, Riot, Bitfarm and CleanSpark are preparing for expansion even as many miners are finding profitability difficult.

Related: Public Bitcoin miners’ hash rate is booming — But is it actually bearish for BTC price?

Is sustainability the answer?

In view of the difficulties discussed, BTC mining firms should adopt sustainable BTC mining models for both profitability potential and to ease regulators. This should include using renewable energy sources, increasing production capacity and installing advanced cooling systems.

Mining firms can enhance their operations by using renewable energy from wind power, solar power and hydroelectricity, which concurrently reduces costs and their carbon footprint. This approach can lead to more consistency and sustainability in Bitcoin mining energy costs. Norway has managed to capture 1% of all Bitcoin mining through a 100% renewable energy approach.

The depressed Bitcoin price, high hash rate and Bitcoin difficulty, as well as low hashprice, contribute to small profit margins, which may lead to sustainable, decentralized mining practices across the industry.

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.

Low hash price, soaring energy costs spell tough Q3 for Bitcoin miners

The third quarter of 2022 has not been any kinder to Bitcoin mining operators in North America and Europe.

Energy problems in North America and Europe and prevailing market conditions have spelled another bleak quarter for Bitcoin (BTC) mining operators on both continents.

The latest Q3 mining report from Hashrate Index has highlighted several factors that have led to a significantly lower hash price and higher cost to produce 1 BTC.

Hash price is the measurement used by the industry to determine the market value per unit of hashing power. This is measured by dividing the dollar per terahash per second per day and is influenced by changes in mining difficulty and the price of BTC.

As Hashrate Index reports, Bitcoin’s hash price was afforded some reprieve in the middle of Q3 as heat waves during the American summer led to a drop in hash rate, which corresponded with a slight BTC price recovery.

However the price of Bitcoin dropped below $20,000 once again and hash rates climbed to new all time highs in September, leading to the hash price slipping closer to all-time lows.

Miner profit margins were further threatened by rising energy costs in North America and Europe. The latter has been particularly hard hit by a “combination of mis-managed renewable energy policies, under investment in oil and gas, nuclear plant decomissionings, and Russia’s war with Ukraine,” which have sent energy prices sky-high.

Related: Top 3 reasons why Bitcoin hash rate continues to attain new all-time highs

American miners have had to contend with the average cost of industrial electricity increasing 25% from $75.20 a megawatt hour to $94.30 per megawatt hour from July 2021 to July 2022. This has also had an effect on hosting service providers that are increasing their power prices in hosting contracts.

As hash price has dropped, some mining operators with mid-range equipment are facing down reaching breakeven costs margins. In the past, retail miners have either abandoned or sold rigs that are no longer profitable to mine.

Liquidating these assets is also becoming more difficult as Bitcoin mining values have been in decline throughout 2022. Rig prices dropped significantly in May and June but “flattened” in August and September according to the report, while the picture is still bleak:

“Old-gen machines like the S9 experienced a precipitous drawdown at the end of June amid Bitcoin’s freefall to $17.5k. With mining economics in the dumpster, the S9 and similar rigs have become unviable except in the cheapest energy markets.”

Publicly-traded mining firms have also faced increasing pressure with increasing interest rates and greater difficulty acquiring lines of credit. This has led to some firms turning to equity fundraising, which has the downside of diluting shareholders at lower stock prices.

However, these at-the-market offerings allow for quick capital raises, which can help fund continued expansion and operating costs through the ongoing bear market.

Miners have also had to sell BTC holdings in order to keep production going in 2022. However this rate has “slowed progressively” through the third quarter and public miners have sold fewer BTC than their monthly production in August and September for the first time since May.

Hashrate Index also cautioned that Q3 could be a precursor for more tough times for the mining industry with the potential for further distressed asset sales, bankruptcies and miner capitulation as the year comes to a close.

New hashprice-based derivatives instrument gives Bitcoin miners another way to hedge

Better luck next time? Luxor’s OTC Bitcoin mining derivatives could offer miners “a much needed tool to hedge their mining operations.”

Hedging against downside has always been a challenge for Bitcoin BTC miners, and the current bear market is a perfect example of how energy prices and crypto market volatility can negatively impact miners’ profit margins and their ability to stay solvent. 

Oftentimes, institutional and retail traders use BTC-, stablecoin- and U.S. dollar-settled derivatives (options and futures contracts) to create hedging strategies that mitigate downside in Bitcoin price, and now an instrument specific to Bitcoin mining is available to miners.

The Oct. 10 launch of Luxor Hashprice NDF, a non-deliverable forward contract, will allow miners to hedge their exposure to Bitcoin price and the energy costs associated with mining.

According to Luxor Technologies, “hashprice” is the revenue BTC miners earn per unit of hash rate, which is the total computational power deployed by miners processing transactions on a proof-of-work network.

The over-the-counter derivatives contracts are settled using Luxor’s Bitcoin Hashprice Index, and investors can choose to settle in dollar-pegged stablecoins, dollars or BTC. A primary benefit of the instrument is that contract sellers can lock in Bitcoin mining revenue, while contract buyers can tap into the upside potential of Bitcoin mining without the need for physical exposure.

Related: Will the Bitcoin mining industry collapse? Analysts explain why crisis is really opportunity

According to Luxor co-founder and CEO Nick Hansen:

“These products are a major step in the Luxor roadmap and something we have analyzed deeply since the company’s genesis; hashprice derivatives are the apotheosis of our vision of hashrate as an asset class, something we’ve been pioneering since we introduced hashprice with the launch of Hashrate Index in 2020.” 

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.

Marathon Q2 Bitcoin production down 44% as fleet remains crippled

Marathon had a particularly rough production month in June after 75% of its fleet went down. It’s still uncertain when its mining facilities will be able to come back online.

Bitcoin (BTC) mining company Marathon Digital Holdings experienced a steep 43.8% decline in Bitcoin production over the second quarter of 2022, with June registering as the company’s least productive month in over a year following the fall of its Montana facility. 

In its latest mining operation update released on Thursday, Marathon reported that it produced 707.1 Bitcoin in Q2 2022, down 43.8% from 1258.6 Bitcoin mined in Q1 2022. 

Marathon’s Bitcoin productivity has been on the decline through Q2 2022.

The company’s Bitcoin production took a particular hit in June after Marathon’s Hardin, Montana facility was hit by a massive storm on June 11, which knocked out the power station that fed 75% of its active fleet. 

The outage made June the company’s least productive month since March 2021, and threatens to continue into July. To date, the Montana facility is yet to return online, and no new blocks have been mined from the MARA mining pool since June 12. 

Marathon CEO Fred Thiel acknowledged that the storm in June had a major impact on productivity, but also cast some of the blame for the lack of hashing power on Marathon’s new Texas mining facilities, which have not yet switched on.

Thiel said the company has installed 29,640 miners “representing approximately 2.9 exahashes per second” in Texas already, though the energization of its facilities expected in June has not yet come to pass.

Thiel said that Compute North, the company hosting mining facilities for Marathon’s devices, can’t be powered until its energy provider gains “federal agency confirmation of its exempt status for tax purposes.”

Marathon’s vice president of corporate communications Charlie Schumacher told Cointelegraph earlier this month that it may be looking to diversify its mining operations across more states in the future.

Schumacher said that in addition to the existing facilities in Texas, the company was exploring options in the Dakota’s, Oklahoma and Georgia:

“We have already been expanding in Texas at different facilities to reduce the reliance on a single major facility. Getting geographic diversity will help protect us in the future.”

Concerns have arisen that more Bitcoin miners will sell coins in order to stay afloat amid rising energy costs and falling mining equipment and crypto prices. Cointelegraph reported on Wednesday that miner revenues are down over 70% from last November’s high.

Related: Bitcoin miners sell their hodlings, and ASIC prices keep dropping — What’s next for the industry?

So far, major miners such as Argo, Bitfarms, Core Scientific and Riot Blockchain have all reported selling coins to pay bills. Schumacher added that Marathon has not sold any coins yet and has no current plans to, but did not rule it out as an option:

“When looking at financing the business, we are looking to do it most advantageously.”

Old Bitcoin mining rigs risk ‘shutdown’ after BTC price slips under $24K

New generation Bitcoin mining machines would remain profitable even if the BTC price crashes by another 50%.

Older Bitcoin (BTC) mining rigs are finding it difficult to generate positive revenues during the ongoing crypto market decline.

75% drop in Bitcoin mining profitability

The profitability of many Application Specific Integrated Circuit (ASIC) machines has dropped into the negative zone after Bitcoin’s fall below $24,000 this June 13, data fetched by F2Pool shows. Those machines include Antminer S11 and AvalonMiner 921, which are now close to their “shutdown price.”

Notably, Bitmain’s Antminer S11 offers a maximum hash rate of 20.5 Terra-hash per second (TH/s) for a power consumption of 1,530 watts.

The cost of running an Antiminer 211 is 0.13 kilowatts per hour (KW/h) based on the global average electricity cost. As a result, it would consume around $4.5 worth of power every day versus the roughly $2 income in the same period, according to data gathered by ASIC Miner Value.

The profitability of Antminer S11 as of June 13, 2022. Source: Bitmain

Similarly, the cost of running Canaan’s AvalonMiner 921 comes to be around $5 per day compared to its income of over $2 in the same period.

Overall, Bitcoin miners’ earnings have dropped from $0.412 per TH/s/day in October 2021 to $0.11 per TH/s/day in June 2022, according to the “Bitcoin Hashprice Index” — a 75% decline in eight months. 

Bitcoin Hashprice Index one-year chart. Source: Hashrate Index

The losses coincided with a sharp decline in the Bitcoin mining hash rate in the last seven days — from an all-time high of 239.15 exa-hash per second (EH/s) on June 6 to 189.72 EH/s on June 13, according to data from CoinWarz.

Bitcoin hashrate data in last 12 months. Source: CoinWarz

This suggests that miners are limiting their BTC production capacity by theoretically shutting down unprofitable mining rigs and may continue in the coming weeks if Bitcoin fails to recover above $25,000 and/or the mining difficulty adjusts. 

Bitcoin mining stocks suffer

On June 13, Bitcoin price hit its lowest levels since December 2020 following a brutal crypto market selloff.

BTC’s price reached as low as $23,707 (data from Coinbase) versus its November 2021’s peak of $69,000. The losses came due to the concerns about rising U.S. interest rates.

BTC/USD daily price chart. Source: TradingView

Bitcoin mining businesses, which remain at the forefront of minting and supplying new BTC tokens, have suffered the brunt of falling prices. For example, Canaan’s stock dropped by more than 90% after topping at $39.10 per share in March 2021.

Similarly, VanEck’s Digital Assets Mining ETF (DAM), which opened for business in early March 2022, had lost 63% of its value as of June 10, measured from its record high of $46.05. It looked poised to open June 13 lower, per Nasdaq’s pre-market data.

VanEck Digital Asset Mining ETF daily chart. Source: TradingView

New gen BTC mining rigs still in profit

On a brighter note, some mainstream mining machines still generate profits for miners, hinting their owners would be able to weather the bearish Bitcoin market.

Related: Crypto winter survival guide: Community shares game plan for the bear market

That includes the newly-launched iPollo’s V1, which returns a daily income of around $62 against its $9 power consumption in the same period, and machines from the Antminer’s S-series, which generate daily revenues of $4.75–$18, despite Bitcoin’s below-$25,000 prices.

Nonetheless, some profitable machines are near their shutdown thresholds, including Antminer’s S17+ (73T). It could become unprofitable when BTC’s price drop to $22,000, according to data provided by Bitdeer.

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.