As the market rout intensifies for Bitcoin and Ethereum miners, some of them have been forced to close shop.
The crypto market has been fraught with many negative sentiments lately. This development seems to have touched miners, a core part of the crypto ecosystem.
Recently Ethereum mining hashrate—the computing power used to secure the network— recorded a significant decline in the past week. Due to the drop in the value of mining earnings. Glassnode reveals that his metric declined below 900 TH/s from 1,000 TH/s last week.
Ethereum Miners Suffer Lower Proceeds
A myriad of challenges has contributed to the plummeting numbers of Ethereum hashrate. The anticipated difficulty bomb is one of the foremost reasons for the reduced mining interest. This process will reduce minting profits on the smart contract blockchain. Ethereum developers have announced delaying this operation by another 700,000 blocks, estimated to occur in September 2022.
The difficulty bomb is one of the many phases necessary for achieving the long-awaited Eth2. This procedure often referred to as Ethereum 2.0, is a set of upgrades that improve the network’s speed, scalability and energy efficiency. Onchain data has portrays that more supporters are showing commitment given the growing sum of tokens in the deposit contract.
ETH2 Deposit Contract. Source: Nansen
More Ethereum proponents are now staking 32 ETH to qualify as validators which are required for this transition from proof-of-work (POW) to proof-of-stake (POS). In total, about 13 million tokens have been accumulated by almost 76,000 unique depositors in the deposit contract.
Furthermore, higher running costs have exacerbated these lower proceeds due to higher energy costs. Following the Russian-Ukraine conflict, energy prices have risen significantly, as reflected in the consumer price index. Data shows these figures increased by at least 3.9% since May and 86% since mid-2021. This index currently sits above 160 points.
These worsening conditions have forced a lot of Ethereum miners to quit mining and are selling their equipment to cut their losses. A report from a secondary market indicates that this development may have resulted in a price crash on video cards listed for about $600.
Bitcoin Mining Firms Fight To Survive
Similarly, Bitcoin miners have shared the same fate as Ethereum miners in this regard. Last week Canadian-based crypto miner, Bitfarms announced the sell-off of a significant portion of its long-held Bitcoin stash to stay afloat. According to the company, 3000 BTC valued at ~$62 million were sold to settle lingering debts and strengthen their balance sheet.
Bitfarms’ Chief Financial Officer (CFO), Jeff Lucas, explained that the company was taking new measures to adapt to the tightening market conditions. He added that they would also sell off all daily earnings instead of the “hodling” strategy they had adopted earlier.
“Since January 2021, we have been funding operations and growth through various financing measures. We believe that selling a portion of our BTC holdings and daily production as a source of liquidity is the best and least expensive method in the current market environment,” said the CFO.
Other mining companies have followed in what seems to be a desperate effort to keep up with the bear market. Argo Blockchain Plc, Roit, and Core Scientific also had to liquidate some of their limited Bitcoin reserves. These firms were forced to sell 427, 250, and 2,598 BTC, respectively.
Both Bitcoin and Ethereum prices have suffered substantial losses amidst the worsening market capitulation. The former currently sits at $21,398, while the smart contract token trades at $1,229. The top cryptocurrencies have lost at least 69% of their all-time highs since November 2021. However, prices for both digital assets seem to have stabilised daily over the past week.
Do you think Bitcoin and Ethereum miners will continue to suffer more losses given the current market condition? Let us know your thoughts in the comments below.
Kingsley is a fintech writer with over 4 years of experience covering blockchain and cryptocurrency news. Alo first discovered Bitcoin in 2016 and has been passionate about it ever since, particularly the various ways blockchain can help Africa and the world at large. He desires to give the crypto space a more geographically balanced narrative and serve as a bridge between Africa and the rest of the world. His articles have been featured in Cointelegraph, Beincrypto, and Forkast.news, among others.
