Bitcoin’s Price Tumble Tests Resilience of Crypto Miners
Bitcoin miners are facing a crucial test in the wake of the token’s 50% plunge from an all-time high.
While many mining operations made a handsome profit during Bitcoin’s runup last year, the recent decline could punish those with less efficient operations.
Mining -- which uses powerful computers, or servers, to solve math problems and order transactions on Bitcoin’s blockchain -- is a costly business, fraught with regulatory and environmental concerns, and a price drop only complicates the situation.
Miners that aren’t as efficient, or signed more expensive power contracts, could get pushed out or gobbled up, said Matt Schultz, executive chairman of miner CleanSpark Inc.
“When oil prices drop, the less-efficient producers in West Texas shut down. Same thing is happening here,” he said.
The selloff comes at a vulnerable time for the industry as Kazakhstan has cut off miners’ power and Russia’s central bank has proposed a ban on miners -- meaning about 15% of all Bitcoin mining power may need to relocate, by some estimates. While the sector was able to bounce back after a similar block in China, there could be more casualties this time around.