A Bullish Bitcoin Mining Hashrate Prevails Despite Price Uncertainty

With Beijing-domiciled Bitmain reportedly readying a blockbuster $3 billion IPO, cryptocurrency mining has been thrust into the spotlight once again. Bitmain, which boasts more than three-quarters of the market for mining equipment like ASICs, plans a September regulatory filing in Hong Kong, which based on some market predictions could coincide with when the real market recovery begins.

Bitcoin miners, meanwhile, are a loyal bunch and haven’t abandoned ship in the midst of the cryptocurrency storm, which bodes well for Bitmain’s upcoming listing as well as the outlook for the broader crypto market. This is apparent because the hashrate, which reflects the amount of computing power dedicated to the process of creating new coins, has been on the rise, according to Bloomberg.

Source: Bloomberg

The bullish trend suggests that bitcoin miners continue to generate a profit and have remained committed to the process while more skittish investors have abandoned ship. Bloomberg suggests that there is a lag between the price of bitcoin and the hashrate, but in some instances miners are “willing to run at a loss,” at least for a while.

Which brings us to the breakeven level for bitcoin mining, for which there are various estimates cited by Bloomberg:

  • Fundstrat says $8,000
  • Morgan Stanley says $8,600
  • CoinShares says $6,400

With the bitcoin price hovering at $6,359, miners are about profitable based on CoinShares research. But that doesn’t mean there hasn’t been any collateral damage, as consolidation has left the smaller mining shops out in the cold as the largest miners run the leanest and most efficient operations.

Genesis Mining’s Outlook

Genesis Mining, which is a cloud-fueled bitcoin mining company, is among the firms increasing capacity, with Marco Streng, mathematician, an early bitcoin investor and CEO of Genesis Mining, telling Bloomberg: “There are still major expansions happening, especially from more efficient miners. The expansion is so big that it compensated for the drop-out of not-so-efficient miners.” Indeed, it’s those firms with a grip not only on mining pools but also mining equipment, like Bitmain, that have the most control.

But even Genesis Mining has its limits. The company stated in a blog post today that “miners around the globe are struggling to stay in the game,” pointing to “declining rewards,” which the company has no control over.

Genesis in the blog pointed to a perfect storm of a falling bitcoin price since January, a “rising difficulty” surrounding the mining process, which increases computing power requirements, and subsequent weak mining output by some users. As a result, these miners are in jeopardy of having their accounts closed once a grace period expires unless they upgrade to a different contract.

So in a sense, “it is the best of times, it is the worst of times” for crypto miners in a script whose next act has yet to unfold.

Featured image courtesy of Shutterstock.

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.