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July 17, 2022

How Could Miners Affect Bitcoin Price

A July 9 tweet by @PricedinBTC about the cost to mine Bitcoin in the US caught the crypto community’s attention, particularly given BTC miners recent headlines.

The crypto bear market and rising energy prices have generated a perfect storm for the mining business, causing some firms to lay off personnel and delay major investments. Some warned of a death spiral for Bitcoin miners.

Raymond Nasser, CEO of US-based Arthur Mining, told Cointelegraph that his company’s margins don’t match @PricedinBTC’s.

Arthur Mining has a 25-MW capacity and utilizes green energy. One may first discount their statistics since listed businesses like Marathon Digital Holdings have 300 MW plants, but they depend on conventional grid electricity – even if some come from hydroelectric facilities.

Smaller mining operations use a flare and stranded oil and gas to attain the best ESG standards. Mobile Bitcoin miners use greener, more efficient, and more lucrative energy sources than conventional methods.

Nasser on miners’ $16,000 output cost:

“Subjective diagrams. The largest new projects in the business are seeking off-grid alternatives, and this graphic shows urban on-grid energy expenses. In two U.S. states, our all-in energy prices are below $0.02 kWh.”

According to QuickElectricity, commercial power prices per kWh in Idaho, Utah, Virginia, Texas, Nevada, North Dakota, Nebraska, and Oklahoma varied from $0.08 to $0.09 in March 2022.

The Bitcoin network values efficiency, thus the labor-intensive manufacturing process constantly seeks the lowest operating costs. Mobile ASIC mining equipment may use alternative energy sources. These devices may be carried to offshore oil and gas platforms in containers and use oscillating electricity.

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Upstream Data, a Canadian producer of Bitcoin mining data centers, produces portable equipment without pipes or midstream infrastructures. After establishing 180 data centers, this practice is becoming widespread.

Not every mining firm has long-term bank finance. By pledging miners and infrastructure as collateral, these corporations developed a riskier loan structure. As Bitcoin price fell, so did mining equipment costs, exacerbating their finance when they needed it most.

The industry has a problem, but it may just be young. Still, miners selling more Bitcoin than they’ve mined may be pressuring the price of BTC.

This never-ending loop promotes the “death spiral” hypothesis, but it ignores the fact that miners shut down their equipment below a specific price level and many relocate to locations with reduced power rates or seek out renewable solutions.

Reduced mining activity makes the network less safe, although this danger is overblown since Bitcoin’s difficulty adjustment boosts miners’ revenue. Bitcoin mining poses no systemic danger to BTC prices.