Bitcoin Miners Prove Their Mettle in Bear Markets: Galaxy Digital

Bitcoin Miners Prove Their Mettle in Bear Markets: Galaxy Digital

Bear markets cannot be underestimated and will be helpful in discovering things that are hidden when the price of bitcoin keeps rising. Even these difficult seasons allow to discover the true value of the miners of the first of the cryptocurrencies.

This was stated by Brandon Bailey, Galaxy Digital mining analyst during the World Digital Mining Summit 2022 held in the United States.

At the event, which brought together experts from the digital mining industry, Bailey analyzed how the Bitcoin mining sector has evolved and faced challenges and hard times.. Among them he highlighted the restrictions that China has imposed on the world of cryptocurrencies.

At one point China housed up to 75% of the total Bitcoin hash rate and after the government ban, more than 50% of the network’s computational power fell. “However, it managed to recover all its losses in a short time, in an act that highlighted the resilience of the network and the importance of miners within the ecosystem,” said Bailey.

The analyst narrated that, after overcoming difficult moments, then came better times for miners who took advantage of a bull market. At that time, the incursion of mining companies into stock markets took place.

“This trend not only allowed greater liquidity for these companies, but also offered greater transparency in the operational dynamics of Bitcoin mining”, highlighted the partner of the mining wing of Galaxy Digital.

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The positive or negative moments for the industry, Bailey describes them as catalysts. And he adds that during his exploration of the sector has discovered that Bitcoin miners do not have a standard of defined strategies to face the hard moments or the softest.

“There aren’t even standardized metrics to determine the long-term health of a mining operation, but metrics are still used because mining is a capital-intensive commodity business that has an ongoing need for capital to scale.”.

Brandon Bailey, mining analyst at Galaxy Digital.

Bitcoin Miners Prove Their Mettle in Bear Markets: Galaxy Digital
Brandon Bailey, Galaxy Digital mining analyst during the World Digital Mining Summit 2022 held in the United States. Font: YouTube/Bitmain.

Bear market throws keys to discover the best strategies of miners

From his perspective, Brandon Bailey believes that for much of 2021 miners were rewarded enough to keep their teams active during the current bear market.

Thus, many bitcoin mining companies announced future purchase orders to expand your equipment fleet.

“According to statements from public and private miners, a total of USD 3.9 billion were raised in capital in 2021 and USD 2.3 billion were generated in debt. However, these valuations were never combined with a potential future income stream. The miners got too aggressive with the easy money that was available.”

Brandon Bailey, mining analyst at Galaxy Digital.

For the analyst, the bull market affected the mining industry because nobody stuck to the strategies.

And now we see unprofitable companies, unattainable business models, blocked evaluations and many manias with everyone looking for performance. Bitcoin mining is, for many, less attractive today in a bear market, when in fact it is the perfect time to focus on investing with the idea of ​​doubling the profits.”

Brandon Bailey, mining analyst at Galaxy Digital.

In that sense, he confessed that for Galaxy Digital, which offers financing for startups that operate within the ecosystem, it is more valuable to detect mining companies that operate with operational excellence and they have teams that understand the nuances of the industry.

“We believe that companies’ treasury management strategies will be one of the most important survival tactics to pursue during bear markets and an important consideration in maintaining the overall financial health of miners,” Bailey noted.

He added that one strategy lenders and partners will applaud will be Bitcoin miners maintain thoughtful treasury management that allows them to meet their capital needs. He thinks that the best thing will be to maintain formulas to survive the bear markets and take advantage of the bull markets.

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