Bitcoin miners have been forced to tap into their cryptocurrency stashes as a plunge in prices, rising energy costs and increased competition bite into profitability.
"The plummeting profitability of mining forced these miners to increase their selling rate to more than 100 per cent of their output in May. The conditions have worsened in June, meaning they are likely selling even more," said Arcane analyst Jaran Mellerud. The crypto mining space rapidly expanded in 2021 as bitcoin more than quadrupled in value, but this growth has further pressured margins as the process is designed to grow more difficult as the number of miners increases.
"If you're not at a very low-cost electricity area at this point, you've got to shut down," noted Chris Brendler, senior research analyst at D.A. Davidson. Some miners, including Bitfarms, are using proceeds to negotiate financing agreements to fund operations and make payments on expensive mining equipment.