Canadian cryptocurrency mining giant Bitfarms went against its holding strategy and instead sold 3,000 bitcoins for $62 million amid the recent market rout that squeezed miners’ profitability.
Despite the sale, Bitfarms remains bullish on long-term price gains and is focused on maintaining BTC liquidity through its mining operations, as it anticipates better economics, said Jeff Lucas, Bitfarms’ chief financial officer.
He also said that the company has been taking various financial measures to fund growth and operations since January 2021, but selling bitcoin is the cheapest way to increase liquidity in the current market.
The recent sale and $37 million in new equipment financing injected the company with $100 million in liquidity. Bitfarms used some of the funds to reduce Galaxy Digital LLC’s $66 million debt by $28 million to $38 million. The company mines an average of about 14 bitcoins per day.
Mining stock prices take a hit
Mining companies have had to rethink their operations and holding strategies amid volatile cryptocurrency markets, with many mining giants such as Toronto-based Bitfarms facing reduced capital injections through the stock market as share prices tumbled. Its shares fell from $4.27 on April 12 to $1.83 at press time.
Riot Blockchain, one of the oldest and best-known mining companies in Colorado, U.S., saw its share price plummet to around $5.30 a share from around $23 on March 28, 2022, while shares of another mining giant, Marathon Digital Holdings, It has fallen to a three-month low of $7.41 from around $31 in late March.
Smaller BTC miners face double challenge of maintaining profitability
While Bitfarms uses 99% renewable energy through long-term power contracts and is therefore less vulnerable to energy prices eroding profits, mining revenue for newly minted tokens and transaction fees fell to an almost annual low on June 16, 2022 Point $14.4 million. The previous trough was reached on June 27, 2021, with just over $13 million in revenue.
As Marathon Digital’s Charlie Schumacher recently told the Financial Times, small miners face the twin threats of falling bitcoin prices and rising energy costs. As a result, some have cancelled orders for new miners.
According to its co-founder Didar Bekbaouov, while the energy costs for large miners like Bitfarms are fixed, Bitfarms has 3,349 BTC on its balance sheet, while smaller miners like Xive have 3,349 BTC on its balance sheet. Had to close some businesses when it fell below $25,000.
Data from Blockchain.com confirms the theory that the overall mining hash rate has dropped. The total computing power required to mine new bitcoins has dropped from 231.428 exahashes/s on June 12, 2022 to 206.4 EH/s at the time of writing, indicating that miners are slowly but surely devoting less computing resources to receive Fewer bitcoins.
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