Public miners’ share of the Bitcoin (BTC) network could grow to 40% by mid-2023, according to a new report from Hashrate Index. But this could bring more tension to an already bearish BTC market.
The hash rate of public Bitcoin miners skyrockets 295% in a year
The outlook came after evaluating the hash rate performance of Core Scientific, Marathon Digital Holdings, Riot Blockchain, and other public miners over the past 12 months. Notably, these companies increased their hash capacity to 58 EH/s in October 2022, up from 15 EH/s a year ago, a 295% increase.
By comparison, the Bitcoin hashrate of private miners increased from 134 EH/s to 177 EH/s in the same period, a growth of 58%.
“The driver of the rapid increase in public miner capacity is that they were able to access cheap capital during the 2021 bull market”explains Jaran Mellerud, Bitcoin mining analyst and author of the Hashrate Index report.
He adds that public miners used the money to buy huge mining equipment. As a result, these companies have tens of thousands of Bitcoin mining rigs in storage, waiting to be plugged in, while awaiting deliveries of more rigs.
Core Scientific – the biggest public #bitcoin miner – has a 5% share of the total hashrate. Marathon and Riot follow behind, each controlling over 2% of Bitcoin’s hashrate.
In total, there are seven public bitcoin miners with a hashrate share of more than 1%. pic.twitter.com/ZnwsFjvQcy
— Jaran Mellerud (@JMellerud) October 24, 2022
Core Scientific -the largest public #bitcoin miner- has a 5% share of the total hashrate. Marathon and Riot follow suit, each controlling more than 2% of the Bitcoin hashrate.
In total, there are seven public bitcoin miners with a hashrate quota greater than 1%.
Therefore, the Bitcoin hash rate generated by public miners could continue to increase substantially as more and more new machines come online.
Secondly, private miners cannot access capital to buy mining equipment. Therefore, its contribution to the hash rate may still be slower in comparison.Mellerud argues.
Stressed Miners Could Increase Bitcoin Selloff Risks
But in 2022, Bitcoin miners in general have been hit by falling BTC prices, rising energy costs, regulations and growing competition. Public mining companies have rushed to raise capital by issuing additional stakes or taking on more debt, causing massive falls in their prices.
For example, the Valkyrie Bitcoin Miners ETF (WGMI), which tracks several major public miners, has plunged 75% since its launch in February.
Another unpopular alternative to raising capital is selling Bitcoin at lower prices. For example, Core Scientific has shed 85% of its Bitcoin holdings since the end of March, according to its August update.
In the same period, BTC price dropped by 60% to around $19,500 per token. In other words, a rising hash rate may increase miners’ need to sell Bitcoin for cash to sustain their operations.
“It’s an absolute bloodbath,” wrote Marty Bent, founder of Bitcoin media company TFTC, adding:
“Bitcoin miners are in a world of pain right now and the likely result is a wave of failures in the coming months as the hash rate continues to rise, the price stays flat, and energy prices continue to rise. “.
In the meantime, Mellerud says that many public miners will not be able to cope with a drop in cash flows, which will drive them out of business. As a result, your mining equipment could be auctioned off to private miners.
The other way, the decision of public miners to increase their capacity may pay off if the price of Bitcoin undergoes a decisive turn to the upside. As Cointelegraph reported, signs of a potential market bottom are already appearing, which would come as a relief to miners struggling with current prices.
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