Rising Energy Prices Force Crypto Miners To Sell Bitcoin At Discounted Price

  • Electricity costs are skyrocketing, putting pressure on the profits of companies involved in energy-intensive bitcoin mining.
  • Some exchange-listed crypto miners sold their bitcoin at a huge discount to cover rising costs.
  • Businesses with loans backed by bitcoins are at risk of collapsing and individual miners will be squeezed out, analysts said.

Bitcoin miners are struggling to stay profitable as energy prices soar and crypto prices plummet, putting some major players at risk of collapse.

Listed companies are selling their mined tokens at a deep discount to repay bitcoin-backed loans and cover rising operating costs, which analysts say could eventually lead to liquidations in the struggling sector .

Electricity costs are rising around the world, thanks in part to higher natural gas and coal prices in the fallout from Russia’s war on Ukraine, and in the United States prices will rise by 5% this summer, according to EIA forecasts.


Meanwhile, bitcoin has fallen almost 70% from its all-time high in November to hover around $21,000.

Together, these pressures have hammered the profitability of crypto mining companies. They use carbon-generating supercomputer platforms to “mine” the tokens, which consumes large amounts of energy.

“Utilities account for about 79% of bitcoin miners’ operating costs,” Alexander Neumueller, project manager for the University of Cambridge’s Bitcoin Electricity Consumption Index, told Insider.

“They’re basically facing rising costs and a big drop in revenue,” he said.

Miners are trying to boost their profits by cutting costs and selling off some of their bitcoin, even though its price is at an 18-month low amid a crypto selloff.

“Companies with varying electricity rates will likely need to turn off machines during peak periods. It could last a few hours or even a few days,” said Matt Schultz of CleanSpark.

“A series of publicly traded miners who once held all of their coins have been forced to sell, some at quite steep discounts,” the co-founder of the Nasdaq-listed Bitcoin mining company added.

Riot Blockchain sold 250 of the 466 bitcoins mined in May to raise around $7.5 million, while long-term holder Marathon Digital declined to rule out selling bitcoins for the first time since October 2020.

Even these big players do not hold enough bitcoins to significantly move the price of the token. But analysts said some mining companies could collapse if their profits continue to fall or if they took out loans backed by bitcoins.

“Many miners have taken out high-interest loans to fund their mine-to-hold strategy during the

bull market

“Sami Kassab, an analyst at research firm Messari Crypto, told Insider. “Some of these companies will face liquidations and could potentially go bankrupt.”

All eyes are now on mining companies that have taken out loans backed by bitcoins, putting them at risk of financial hardship. These companies will likely have to continue selling bitcoin at a discount, according to JPMorgan.

“The offloading of bitcoins by miners, in order to meet ongoing costs or deleverage, could continue into the third quarter if their profitability does not improve,” said a team of JP Morgan strategists led by Nikolaos. Panigirtzoglou in a note.

Additionally, soaring energy costs and falling crypto market are seen as likely to crowd out smaller players from the crypto mining industry. Amateurs are unlikely to make a profit right now, according to Cambridge’s Neumueller.

“There may be people mining for ideological reasons, but the industry is very competitive,” he said. “It’s hard to imagine someone who has installed a few machines in their house or garage still making a profit.”

Read more: “I was caught off guard”: 7 crypto influencers talk about the wallet wreckage they suffered in the crash – and how they are adjusting to their new reality

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Rising Energy Prices Force Crypto Miners To Sell Bitcoin At Discounted Price

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