Miners are facing a dangerous storm in 2022, with various unfavorable factors intertwined to make their situation precarious. It was not until the first half of 2023 that this storm began to subside.
In the first half of this year, the high energy prices that affected miners fell back. Natural gas fell sharply by 72%, which eased the power pressure on miners. As the market began to consider the Fed's policy change, risky asset prices rose across the board, and the price of Bitcoin rose from the low point at the end of 2022. $16,600, an increase of 84%. At the same time, as a special inscription called BRC-20 has grown in popularity, fees have soared to unprecedented levels, bringing huge financial benefits to miners. All these developments have positive implications for Bitcoin miners.
As a result, global computing power has increased. Data shows that Bitcoin’s 30-day moving average network computing power will increase by 121EH in the first half of 2023. While it is difficult to pinpoint the exact location of the hashrate, the Middle East, Russia, Latin America, and other parts of the world such as Bhutan saw significant increases in hashrate during the first half of the year. Given the White House’s increased focus on the mining industry over the past year, a number of state-level regulators have decided to take action, forcing some miners to explore new opportunities outside the United States.
However, despite a trend reversal in several key areas of the mining space, the phenomenal increase in hash rate has offset many favorable factors, resulting in a new all-time high in mining difficulty. At the same time, Bitcoin's fourth halving is expected to occur around April 2024. Considering that block rewards (newly issued Bitcoins) account for the majority of miners' income, the halving is bound to have a wide-ranging impact on the mining industry. Impact.
According to estimates from multiple on-chain data sites, Bitcoin’s mining difficulty will drop by approximately 21% in the upcoming adjustment. This would be the largest difficulty drop in Bitcoin history and the first time since December 2018 that the Bitcoin network has experienced three consecutive drops in difficulty adjustments.
Now, with the halving less than 10 months away, miners have developed several strategies to prepare for the event. For miners with better liquidity positions and the ability to raise funds to a certain extent, many miners have already invested in the latest generation of mining machines. Miners that are higher on the electricity cost curve are also choosing to try and upgrade their fleets to more efficient machines to put themselves in a better competitive position after the halving.
M&A has been an attractive option for listed miners facing greater challenges due to high electricity costs, lack of a growth narrative, desire for vertical integration or inability to raise capital. In this way, miners can find companies that can bring resources to make up for their existing deficiencies.
In addition to this, some miners have announced their intention or have taken active steps to participate in the high-performance computing (HPC) data center field, thereby diversifying their revenue sources. The HPC space offers miners a source of income unrelated to Bitcoin mining, while being able to capitalize on the massive hype surrounding AI computing.
To better weather the storm, some miners have been using custom firmware to increase efficiency, allowing them to be profitable at lower break-even levels. In addition to continuously upgrading "mining" equipment, many people choose to jointly form a "mining pool". The principle is to gather a group of scattered "miners" together, wait for the digital currency to be mined, and then distribute it according to the computing power of the equipment.
Summarize
Overall, miners faced many difficulties and challenges in 2022, but in the first half of 2023, these problems began to ease. The fall in high energy prices and the rise in Bitcoin prices have brought positive factors to miners, and global computing power is also showing a growth trend. However, the increase in mining difficulty and the upcoming Bitcoin halving event still pose certain pressures and challenges to miners.
To address these challenges, miners have developed a range of strategies, including investing in the latest generation of mining rigs, upgrading existing equipment, conducting mergers and acquisitions to make up for shortfalls, and actively participating in the high-performance computing data center space to diversify revenue. Despite facing many difficulties, miners are working hard to adapt to market changes and find new development opportunities.