The fall of the cryptocurrency market dealt a serious blow to public mining companies that were increasing production capacity on credit in the hope of continuing the rally of 2021. Faced with a crisis, they are forced to dump the mined Bitcoin at low prices to patch up financial holes.
Initially, mining companies promised to adhere to the “mine and hold” strategy to maximize profits from the sale of coins when the price reaches new records. However, the strategy outlived itself as soon as Bitcoin fell below $35 thousand.
Already in May, mining companies sold more coins than they mined in a month, and in June they increased sales to a record 14,600 BTC. The greatest pressure on the market was exerted by Core Scientific (NASDAQ:CORZ), which dropped 10 thousand BTC in two months. In July, the company got rid of another 2 thousand BTC.
Core Scientific remains the largest hashrate company, mining about 1 thousand BTC per month. However, in terms of reserves, it fell back from the first to the sixth place with the current indicator of 2 thousand BTC.
Nevertheless, the company’s position is not the most depressing in the market, as the sale of stocks and debt restructuring allowed it to retain the first place in computing power.
If Bitcoin grows, it will quickly restore investment attractiveness.
The situation is much worse for Stronghold Digital Mining (NASDAQ:SDIG), which was forced to return 26,200 asics to the NYDIG investment company as part of the liquidation of an agreement to purchase equipment worth $67 million. After the disclosure of the restructuring plan, Stronghold shares fell by 10%. In general, its securities are trading much worse this year than Bitcoin: the drop exceeded 70%.
Now mining companies are forced to sell Bitcoin at low prices and look for ways to restructure loans. For the last three months they have been selling more coins than they are mining. So, in June, the indicator approached 400%, and in July it was 159%. If Bitcoin does not grow significantly, then mining companies will face a series of acquisitions and bankruptcies after the reserves are exhausted.
The drama is added by the fact that the queue for the supply of equipment has stretched for more than six months. Because of this, a number of miners continue to introduce new capacities, despite losses. This explains the slight drop in hashrate and the permanent increase in complexity, including due to the introduction of more efficient machines.
For example, Riot Blockchain (NASDAQ:RIOT) reported a depreciation of Bitcoin assets by $100 million, and net profit in the second quarter reached a record $366 million. At the same time, the company confirmed its intention to increase production capacity in the next six months from 4.4 EH/s to 12.5 EH/s.