How do the big Bitcoin miners survive the bear market?

How do the big Bitcoin miners survive the bear market?

Bitcoin (BTC) miners have been forced to tighten their belts after the entire cryptocurrency market embarked on a price decline that, for some, is not over yet. To this is added the increase in the difficulty of mining, which reduces the performance of the hardware in order to keep the Bitcoin network in a constant rhythm of work.

There are two factors that profoundly affect, for better or worse, the strength of a Bitcoin mining company in bear markets: the price of electricity and the solvency of its finances.

The price that a Government or a private company can establish for the electricity service is something that escapes from the hands of its users. However, there are solutions that Bitcoin miners can put in place to counteract the blows that the bear market may be taking on their finances.

One of the possible solutions, and the simplest, is use hardware that mines more efficiently, and even configure it at the software level to optimize your work even more. In fact, a recent Arcane Research report presents a comparison between cash flow, or cash flow, for bitcoin offered by mining with an Antminer S19 and an Antminer S9.

How do the big Bitcoin miners survive the bear market?
The Antminer S19, being a more modern piece of equipment, provides much higher efficiency than its ancestor several generations ago, the S9. Source: Arcane Research.

Investing in upgraded hardware increases mining profitability in the sense that the advancement of technology allows them to mine with greater power using less energy. Of course, you also have to evaluate the availability and price of such equipment. Which gives rise to the next point: the solvency of the company’s finances.

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Starting and growing a mining company requires investing a lot of money in infrastructure. This often forces owners to resort to loans and other financing instruments. The problem begins when they begin to default on payments or when decrease in profitability causes expenses to exceed net income.

It is crucial to evaluate each financial commitment that the company considers acquiring and that these are approved only if they are essential for its support and growth. In this way, if the market goes through a bearish stage, the chances of surviving it and being able to reap the fruits of such an effort later are much greater.

Which mining companies are best prepared for a bear market?

The Arcane Research report talks about Bitcoin mining companies that, according to them, are better prepared to withstand the onslaught of the downtrend facing the market.

Although the sample on which the article is based only includes five companies, it is worth taking into account the characteristics that they have in common to analyze their relevance when facing falling markets.

According to Arcane Research, Riot Blockchain is the company that looks the strongest in the face of the low profitability that Bitcoin mining shows today.

How do the big Bitcoin miners survive the bear market?
Companies dedicated to Bitcoin mining with the highest market capitalization. Source: Arcane Research.

In the image above, it can be seen that Riot Blockchain is the company that enjoys the cheapest electricity service on the list. Paying just $24 per MWh allows Riot to save around 30% of what Hut and Core Scientific (other companies in the industry) spend on electricity. This already implies a great advantage in terms of profitability when mining BTC, because it is an activity that consumes a lot of energy.

Another aspect in which Riot Blockchain is ahead of other mining companies, according to the information provided by Arcane Research, is the solvency of its finances. The debt/equity ratio is a way of reflecting how solvent a company is regarding the financing of its assets. The higher this value, the greater the risk of its shareholders; so Riot, with 0.1 in its debt/equity ratio, looks like the most reliable company in this regard.

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