There has been bad news lately, and the resulting fear is real. DeFi looks dead, altcoins have completed their life cycle, returning to $ 0 (I guess that’s a joke), and the price of bitcoin (BTC) has fallen lower than even the smartest brains in the room expected.
The unifying theme of the newest bull market seems to be greed. Everyone has become too confident and too greedy, and this can be seen from the amount of debt and leverage that is being released as 3AC, Celsius, BlockFi and Voyager struggle with the real threat of a rise.
Bitcoin miners and BTC mining companies also do not appear to have been immune to the feeling of excessive abundance and the belief that “only upwards” is a fact until the price of bitcoin reaches the long-awaited $ 100,000 target to which most analysts adhered.
Historically, bitcoin miners are an elusive species that is quiet and unwilling to spill the sauce on the public, but Cointelegraph has had some success in securing a moment with HashWorks CEO and founder Todd Essay to discuss the current state of the mining industry and his forecasts for where the market could go next year.
Cointelegraph: Bitcoin is traded below the realized price and is also below the production cost of the miners. The price is also below the previous highest for all time and the hash rate is falling. Typically, analysts in the chain identify these indicators, which hit extremely low levels, as an opportunity to buy for a generation, you think?
Todd This: I believe that current prices are an investment opportunity, as current prices are unlikely to reflect profitable production margins, as the industry is currently structured. However, we believe that prices may remain under pressure as the mining industry and related leverage are reset or reconfigured.
CT: What is the current state of the BTC mining industry? We have heard that leveraged miners go bankrupt, suboptimal, inefficient miners are excluded, equipment may be in the process of being confiscated or liquidated on sale. The share price and cash flow of the quoted miners also look pretty bad at the moment. What is happening behind the scenes and how do you see this affecting the industry over the next six months to a year?
TE: In our opinion, the yield still offers an attractive investment return for those who choose the approach and have long-term goals. Much of the currently installed production capacity is with ASICs in the range below 85 TH / s and with energy contracts that have not been managed like the traditional large energy consumer.
We’ve seen this movie before, haven’t we? Easy money + bad discipline = unbalanced risks. Here we could easily see a long period in which the mining industry is consolidating and allowing various investment capitals to enter the market.
Related: The expiration of $ 2.25B bitcoin options on Friday could prove that $ 17.6K is not the bottom of BTC
CT: Why is it a good or bad time to start digging right now? Are there specific indicators in the chain or profitability indicators that you are looking at or is this just your feeling?
TE: Usually periods of disaster and paradigm shifts will offer benefits to new entrants. Our only focus is to take advantage of these emerging opportunities.
CT: If I have $ 1 million in cash, is it a good time to set up surgery and start digging? How about $ 300,000, $ 100,000, $ 10,000? In the range of $ 40,000 to $ 10,000 for a start-up fund, why might not be a good time to set up a home or industrial farm?
TE: If you have $ 1 million in cash, it may be a good time to take an opportunistic bit of BTC. Fully charged production prices for large miners are not far from these levels. I see that it is difficult to maintain these levels until the ASICs fall further. I think that the time for home digging has largely passed as a result of the new dynamics in the energy industry.
I would encourage those looking for profitability to look for digging opportunities with companies such as Compass Mining or other “cloud” miners, whose equipment and energy contracts can lead to an attractive investment as this dynamic changes.
We believe that as a result of current and expected market disruptions, as well as greater adoption of immersion decisions, attractive opportunities for building large-scale mining operations will continue to exist.
CT: Does falling the price of bitcoin below its previous all-time high for the first time have significant future effects on the underlying assets and industry?
TE: We don’t think so. It is difficult to rely on historical comparisons when working with an emerging commodity and a transforming technical asset such as BTC. Miners produce BTC, given a set of input resources (computing power, access to capital and energy) and the output price does not reflect production costs at all.
The production of BTC on a scale is not much different from the production of oil and gas or other goods. Improvements in drilling technology have transformed North America’s position in global energy markets.
When oil and gas prices plummeted in the early stages of the pandemic, no one doubted whether we should now drive cars or heat our homes. Mining supports blockchain, and work-based calculations will prove that they offer our network the opportunity to move to the future of renewable energy.
We are committed to being an innovative and constructive player in this industry as it continues to mature.
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