Savvy Investors Snap up Mining Farms Amidst Crypto Rout
Crypto mining companies have to tackle the twin problems of rising energy costs and falling crypto prices in order to maintain a profit. In the US alone, the cost of electricity has risen by over 12% in the last year. Since the beginning of the year, the prices of crypto currencies and especially BTC, have dropped significantly. This has also led to a drop in share prices for companies that deal in crypto mining.
Higher crypto prices, usually mean more profits for miners. This also leads to a proliferation of mining companies. With a drop in crypto prices, it means that profits have also dwindled, edging out inefficient miners from the market.
BTC mining alone consumes over 139 terrawatt hours of electricity each year. This is more electricity than what’s consumed in some nations. A slight increase in electricity prices will definitely have adverse effects on the profitability of mining companies.
Most crypto mining companies have lost billions as a result of the rout. Some of these companies have posted losses to the tune of hundreds of millions of dollars.
Others have been forced to liquidate their BTC holding in order to repay their debts and also cover operational expenses. In the recent past, crypto mining companies have liquidated more crypto than what they have mined.
Even in this crypto winter, there exist opportunities for savvy investors. As some of the crypto farms struggle to stay afloat, this may be the best time for investors to swoop in and buy assets from them. This move is beneficial in two ways: First, these assets will be sold at a huge bargain to the investors. Secondly, liquidity provided by investors will act as a life-line for the cash strapped mining companies at this stage and help them navigate the bear market. Investors can also have the option of transferring these mining equipment’s to other locations where electricity and cost of running them is cheaper and profitable.
There are already notable players in the crypto industry who have set up funds specifically for buying assets from struggling crypto mining companies. This is a trend to watch in this market and we expect more capital to be set aside for this strategy.