What will 2023 look like for Bitcoin miners: expert predictions
After a tough 2022, the Bitcoin mining industry continues to live on, with enough big players in the market, although some did go bankrupt last year. Miners will now focus on optimising their costs and accumulating reserves. The new trends for 2023 in the mining industry were described in their blog by Hash Rate Index analysts Jaran Mellerud and Colin Harper. We tell you more about the experts’ point of view.
It should be noted that 2022 did not end well for the Bitcoin mining industry. It was caused by the bankruptcy of Core Scientific, the company that accounts for the largest share of the BTC network’s hash rate.
As reported by sources at the time, the giant continues to generate positive cash flow, but it is also facing a huge debt for the ASIC miners it acquired. Actually, this is what explains Core’s financial problems.
ASIC miner for Bitcoin mining
Judging by the details of the bankruptcy petition, the number of Core Scientific’s creditors is in the range of 1 to 5 thousand units. The largest among them is finance company B. Riley, to whom Core owes $42.4 million.
What will happen to Bitcoin mining?
One of the costs for miners is the cost of doing business reporting. Analysts suggest that in 2023, many companies will want to reduce their spending in this area. That’s why they plan to either go private or conduct merger procedures with other market players, Cointelegraph reports.
Bitcoin network hashtagging
The next priority will be to strengthen the balance sheets of the mining firms. The unsustainable debt levels of some miners will force them to resort to debt restructuring as their only option. Debt restructuring may involve negotiating lower interest rates or extending the maturity of the debt. That is, 2023 will also be a period of massive changes in market dominance, experts say.
Debt to capital ratio of major mining debtors
In addition, miners will increasingly hedge risks by using derivatives on Bitcoin mining. These include those that allow the owners of computing equipment to sell their future hashrate for a certain fixed price. Here’s an expert commentary on the matter.
We will see the formation of a trend where miners will seek to hedge whatever they can hedge, similar to the way these processes are organised in more mature commodity-focused industries.
Unit price of mining equipment (petahesh)
Analysts have also predicted an end to the bearish trend for the cryptocurrency industry as a whole in 2023. However, this does not mean a quick start to a new bullrun. Most likely, Bitcoin and altcoin prices will fluctuate around their bottom for another year or two before a new global growth wave, analysts said.
Note that there are different opinions on this point. For example, Eric Voorhees, the head of ShapeShift, just before the start of a new bull run, including after six months. In addition, the expert thinks that if there aren't any serious negative news, BTC rate can recover to $40,000 this summer. However, all of these are just possible versions of the future that are not bound to come true. Therefore, industry participants should be cautious and rely on their own analysis.
The power of Bitcoin and other cryptocurrencies
The first agreements on the new format of the crypto mining business have already emerged: this week, mining company Core Scientific said it was shutting down equipment owned by the Celsius platform that went bankrupt last year. Core Scientific, one of the world’s largest Bitcoin miners, partly blamed its financial problems on its contract with Celsius after the platform went bankrupt in July and stopped covering its share of power bills. The company’s lawyers said Core was losing $53,000 a day on its hosting contract.
After Core Scientific itself went bankrupt in December, the two companies agreed to shut down 37,000 pieces of mining equipment owned by Celsius under an earlier contract. At Tuesday’s bankruptcy hearing, one of Celsius’ lawyers said the agreement to completely halt financial transactions between the two entities was being finalised.
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Another indication of the reorganisation of the mining business that has begun is the rebranding of Riot Blockchain, which has changed its name to Riot Platforms. By doing so, it has emphasised “the growing diversification of its business operations”.
As a reminder, Riot, whose market capitalisation has fallen by more than 85 per cent in the past year, remains the world's most expensive publicly traded mining company.
Riot has made a significant number of acquisitions over the past few years, some of which may indeed facilitate the transition to a more diversified business model. In December 2021, Riot acquired ESS Metron, a Denver-based electrical component development firm for the power and water industries.
Mining centre
In May 2021, the company also acquired Whinstone US, owner and operator of North America’s largest BTC mining centre, valued at around $651 million. Meanwhile, Riot shares will continue to trade on the NASDAQ stock exchange under the existing ticker RIOT.
We believe that in 2023, first of all, we should expect a significant dip in the Bitcoin network's hash rate. Even though it remains quite high right now, the current BTC exchange rate is somehow not enough for most companies to operate profitably. Accordingly, for some of them the termination of operations and the prospect of bankruptcy is only a matter of time. This is especially true for those giants that have taken out loans and now have to find money to pay interest on their loans.
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