Lately, bad news has increased, and the resulting fear is real. DeFi looks dead, the altcoin has completed its lifecycle by reverting back to $0 (I think it’s a joke), and the price of Bitcoin (BTC) has dropped by even the smartest mind in the room.
A unifying theme of the most recent bull run appears to be greed. Everyone became overconfident and too greedy, and this shows in the amount of debt and leverage that 3AC, Celsius, BlockFi and Voyager are facing with a real risk of going belly up.
It seems that even bitcoin miners and BTC mining companies were not untouched by the spirit of over-enthusiasm and the belief that “just up” was a fact until the bitcoin price reached the long-awaited goal of $100,000, On which most analysts were stuck.
Historically, bitcoin miners have been an elusive species that has been quiet and reluctant to spread the sauce to the public, but it’s important to grab a moment with HashWorks CEO and founder Todd Asse to discuss the current state of the mining industry and his predictions. Cointelegraph had some success in Where the market can rise next year.
Cointelegraph: Bitcoin is trading below the actual value, and it is also less than the miners’ cost of production. The price is also below the previous all-time high and the hash rate is declining. Typically on-chain analysts hit these metrics at extremely low levels as a generational buying opportunity, thoughts?
Todd Ace: I believe current prices represent an investment opportunity as current prices do not reflect profitable mining margins as the industry is currently structured. However, in our opinion, price pressure may remain under pressure as the mining industry and associated leverage are reset or reconfigured.
whistle: What is the state of the BTC mining industry right now? We have heard that leveraged miners are shutting down, sub-optimal, inefficient miners are shutting down, gear may be in the process of being confiscated or liquidated on firesale. The stock price and cash flow of listed miners are also looking very bad right now. What is happening behind the scenes and how do you see it impacting the industry over the next 6 months to a year?
te: In our opinion, mining still offers an attractive investment return for those who are selective about approach and have long-term goals. Most of the mining capacity currently installed with ASICs is in the sub 85 TH/s range and with energy contracts that are not managed as traditional large-scale energy consumers.
We’ve seen this movie before, haven’t we? Easy money + poor discipline = unbalanced risk. We can easily see here a long period where the mining industry consolidates and allows various investment capital to enter the market.
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whistle: Exactly why is now a good or bad time to start mining? Are there any specific on-chain metrics or profitability metrics that you’re looking at or is it just your gut feeling?
te: Generally the duration of the crisis and changes in the accepted paradigm will provide benefits to the new entrants. Our sole focus is to take advantage of these emerging opportunities.
whistle: If I have $1 million in cash, is it a good time to set up an operation and start mining? What about $300,000, $100,000, $10,000? Why might this not be a good time to set up an at-home or industrial-sized mining farm, in a seed fund range of $40,000 to $10,000?
te: If you have $1 million in cash, this might be a good time to opportunistically take some BTC. The fully loaded production price for major miners is not too far from these levels, I think it is difficult to maintain these levels unless the ASIC price drops further. I think the time for domestic mining has largely passed as a result of the new dynamism in the energy industry.
I encourage yield seekers to seek mining opportunities with companies such as Compass Mining or other “cloud” miners whose equipment and energy contracts may yield an attractive investment as these dynamics change. .
We believe that existing and expected disruptions in the market, as well as a result of greater acceptance of immersion solutions, will continue to be attractive opportunities for the creation of large-scale mining operations.
whistle: Will the price of bitcoin falling below its previous all-time high for the first time have any significant future impact on the asset and industry fundamentals?
te: In our opinion, no. Historical comparisons are difficult to rely on when dealing with an emerging commodity and a transformative technical asset like BTC. The miners are producing BTC, a set of inputs (computing power, access to capital, and energy) and the output value does not always reflect the cost of production at all.
Mining BTC on a large scale is fundamentally not much different from the production of oil and gas or other commodities. Improvements in drilling technology changed North America’s position in global energy markets.
When oil and gas prices fell early in the pandemic, no one questioned whether we needed to drive cars or heat our homes. Mining supports blockchain, and proof-of-work computing will prove to provide our grid with the potential to transition into a renewable energy future.
We are committed to being an innovative and creative partner in this industry as it matures.
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