Profitable bitcoin mining is essentially a result of an efficient and highly skilled team of professionals that can maintain runtime, a founder of a Bitcoin mining company has asserted. Therefore, even when the price is hovering around $20,000, a bitcoin miner with these attributes can still operate profitably.
‘Bitcoin Fundamentals Rarely Change’
The drop in value of bitcoin from just under $30,000 at the start of June to below $20,000 by mid-month is believed to be one of the factors that contributed to the collapse and insolvency of large crypto entities like 3AC and more recently Voyager. These two high profile entities, however, are by no means the only ones seriously affected.
Besides having to deal with lower prices, many market participants, including bitcoin miners, have had to contend with the elevated risk of becoming insolvent. As the situation with 3AC has shown, many market participants were, or are still, over-leveraged. Another significant drop in prices could result in more insolvencies.
However, for other market participants like BTC miner Permian Chain, a further drop in the price of the top crypto is unlikely to have much impact on the company’s long-term plans. According to the founder and CEO of the Canada-based cryptocurrency mining firm, Mohamed El-Masri, the fundamental value behind bitcoin is what motivates them. El-Masri also explained to Bitcoin.com News via email that the short-term price volatility of the crypto asset and the accompanying media headlines alone cannot cause Permian Chain to change course.
Below are the rest of the Permian Chain CEO’s responses to questions sent to him by Bitcoin.com News via email.
Bitcoin.com News (BCN): The continuing downward trend of crypto asset prices has already led to the collapse of some major players in this space. There is no doubt Bitcoin miners too are facing the heat. Can you explain to our readers how a bitcoin price of under $20,000 affects miners?
Mohamed El-Masri (MM): The over-leveraged situation that some of the major bitcoin miners are facing is widely a result of global macroeconomic factors that drove energy prices to the roof and put downward pressure on equity stocks and crypto markets. The major sell-off on crypto exchanges was widely triggered as a result of the vulnerabilities, and to a certain extent, the negligence of over-leveraged market participants that were forced to liquidate some or all of their bitcoin and other digital assets to cover debt payments.
A sub-$20,000 bitcoin price will definitely not provide the outstanding returns that bitcoin miners experience above $45,000. However, most industrial bitcoin miners are running new generation and highly efficient ASIC equipment, where they can still remain profitable, assuming they can maintain power costs within $0.05/kWh and $0.10/kWh. Smaller miners that don’t have economies of scale and low-cost energy sources are mining below their break-even point for sure. However, profitable bitcoin mining is widely a result of an efficient and highly skilled team of professionals that can maintain runtime, even during a $20,000 bitcoin market.
We shouldn’t forget one of bitcoin’s key features, its Difficulty Adjustment Algorithm, which rewards miners that stay online during low market cycles as other miners turn off their equipment due to lack of profitability, defaults, insolvency or whatever… The key to gaining and benefiting from the upside is to stay online with the most hashrate possible for as long as possible.
BCN: What has been the impact of the depressed crypto prices on Permian Chain’s operations?
MM: Permian Chain will continue to mine bitcoin, regardless of market prices. Headlines and market conditions change, but fundamentals really rarely change. The fundamental value behind bitcoin is what we are in this business for.
As for our mining sites, we have established a streamlined relationship with our energy provider(s) by implementing our energy-as-a-service and bitcoin mining platform to streamline our efforts. For example, Permian Chain works closely with our energy producer and site manager in Alberta, Brox Equity, to streamline a vertically-integrated value chain; from onsite fieldwork to online software solutions, we are able to keep mining and maintain operations.
BCN: If prices were to go down even further, will it still be profitable for Permian Chain to continue mining?
MM: It all depends on what you view to be profitable. If we are talking about a dollar value to assess profitability, then probably not. However if we look at profitability in terms of bitcoin, then yes. In my personal opinion, the fundamental value is not in line with bitcoin’s market price. Fundamentals take time to become obvious to the masses.
If you have a ten-year outlook for your bitcoin investment, then I believe bitcoin mining is a strong value creator. It is also very important to realize that if the bitcoin price continues to drop, it is very likely that a lot of miners will start shutting down globally. If enough miners shut down their operations, that will put downward pressure on the difficulty adjustment. As the difficulty rate drops, the process of mining becomes less difficult. As a result, this increases a miner’s chances of earning bitcoin more often than when the difficulty rate is high.
The difficulty rate measures how hard an ASIC mining machine would have to work to verify transactions on the blockchain (solving blocks of transactions in exchange for bitcoins as rewards). With lower difficulty rates, miners can find…
Read More: Bitcoin’s ‘Fundamental Value Is Not in Line With Market Price’ — Crypto Miner –