- During the presentation corresponding to the second quarter of 2022, Bitfarms, disclosed that it experienced a net loss of US$142 million in Q2 alone.
- Even though the company saw its revenue increase compared to the same quarter last year, the drop in the price of Bitcoin affected its earnings.
As the month of August rolls around, companies around the world begin to release their results for the second quarter (Q2) of 2022, and of course, Bitcoin (BTC) mining companies are no exception.
In this sense, according to its presentation before the United States Securities and Exchange Commission (SEC), bitfarms, a major BTC mining company, experienced a net loss of US$142 million in Q2 alone.
The question is: Who is to blame? Bitcoin? What happened?
A Q2 of terror for Bitfarms
I agree with you financial statements published by Bitfarms, the company itself experienced an increase in its revenue compared to Q2 2021. In particular, in Q2 2022 the company had $42 million in revenue Americans as a result of an increase in their hash rate, that is, the computing power they have.
“With strong operational growth, we increased our corporate hashrate by 33% from the start of the quarter and 157% from a year ago to 3.6 exhash per second (EH/s) as of June 30, 2022.”Geoff Morphy, president of Bifarms, said at the Press release.
Therefore, the problem does not come from income. At the level of cost of sales, there is an increase of 142% compared to Q2 2021, causing the company to see a reduction of 59% at the Gross Margin level compared to the quarter of last year.
One thing to keep in mind is that costs of sale include energy and infrastructure expenses, depreciation and amortization, electrician salaries and payroll taxes, and purchases of electrical components. According to Bitfarms, the increase in this type of cost is explained by the addition of new miners. However, the situation does not end here.
Bitcoin’s Role in Bitfarms Losses
When looking at operating expenses, there is also a very significant increase in the sameyes The reason? Mainly the decline in Bitcoin prices during the second quarter.
Recall that at the beginning of April 2022, the price of BTC was around $45,900 US dollars, while at the end of June, it was around $19,300 US dollars. This translates to a 57.95% reduction in the value of the cryptocurrency that Bitfarms actually mines.
Within operating expenses there are two accounts: Realized Loss or (Gain) and Unrealized Loss or (Gain). These have to do with the sale or not of the digital assets that the company owns.
According to the information presented in the report to the SEC, Bitfarms sold 3,357 BTC worth $69.3 million US dollars. At the end of June, you would have 3,144 BTC.
It is precisely for this reason that it is often pointed out that Bitcoin mining companies are much more volatile than the asset itself. In the end, all your income, costs and expenses directly depend on the valuation of BTC but, in addition, you have fixed expenses that you must meet regardless of your operations. Therefore, if Bitcoin does poorly, the mining companies’ losses may be equal to or greater.
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