Bear markets are for construction, which is why HashWorks CEO Todd Esse believes BTC’s current price gives an opportunity for individual investors and industrial BTC mining firms.
Recently, negative news has been abundant, and the ensuing worry is palpable. DeFi seems to be gone, altcoins have finished their lifespan by returning to $0 (I assume that’s a joke), and Bitcoin’s (BTC) price has fallen lower than even the brightest minds in the room predicted.
Greed seems to have been a recurring element in the most recent bull market. Everyone became overconfident and greedy, as seen by the amount of debt and leverage being unwound as 3AC, Celsius, BlockFi, and Voyager face the actual possibility of going bankrupt.
It seems that Bitcoin miners and BTC mining businesses were not immune to the attitude of over-exuberance and the idea that “up only” was a reality until Bitcoin’s price reached the long-awaited $100,000 objective set by most experts.
BTC MINING:
Bitcoin miners have traditionally been an elusive species, remaining quiet and unwilling to spill the beans to the public, but Coinkurry was able to secure an interview with HashWorks CEO and founder Todd Esse to discuss the current state of the mining industry and his predictions for where the market might head in the coming year.
Bitcoin is now trading below the realized price, as well as below the miners’ cost of production. The price has also dropped below its previous all-time high, and the hash rate is decreasing. On-chain experts often identify these measures reaching severe lows as a generational purchase opportunity, what are your thoughts?
Todd Esse: Current prices, I feel, offer an investment opportunity since they most certainly do not reflect viable mining margins as the sector is now constituted. However, we believe that prices will stay under pressure as the mining sector and its accompanying debt are reset or re-configured.
CT: What is the current situation of the Bitcoin mining industry? We’ve heard that leveraged miners are going bankrupt, that sub-optimal, inefficient miners are shutting down, and that hardware is being seized or auctioned at firesale. The stock price and cash flow of publicly traded miners are also looking bleak right now. What’s going on behind the scenes, and how do you anticipate that affecting the business in the next six to twelve months?
TE: Mining, in our perspective, continues to provide a good investment return for those who are discriminating in their approach and have long-term ambitions. Much of the mining capacity that is presently deployed is with ASICs in the sub-85 TH/s range and with energy contracts that have not been handled in the same way that a regular large scale energy user would.
We’ve all seen this movie, right? Unbalanced risks result from easy money combined with a lack of discipline. We may easily see a long time here when the mining sector consolidates and enables other types of investment capital to join the market.
CT: Why is this a good or poor moment to start mining? Are you looking at specific on-chain indicators or profitability measures, or is it simply your gut feeling?
TE: New entrants often benefit from moments of turmoil and adjustments in the conventional paradigm. Our main concentration is on capitalizing on these new prospects.
CT: Is it a good time to start a mining enterprise with $1 million in cash? What about a $300,000, $100,000, or $10,000 budget? Why not build up an at-home or industrial-sized mining farm now, with initial funds ranging from $40,000 to $10,000?
TE: If you had $1 million in cash, this could be an excellent moment to get some BTC. The main miners’ fully loaded production prices are not far from these levels. I believe it will be tough to sustain current levels until the value of ASICs falls more. As a consequence of changing dynamics in the energy business, I believe the time for home mining has essentially gone.
I would advise anyone seeking yield to explore for mining possibilities with businesses such as Compass Mining or other “cloud” miners whose equipment and energy contracts may produce an appealing investment when these dynamics shift.
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We think that, as a consequence of current and anticipated market disruptions, as well as increased adoption of immersion solutions, there will continue to be appealing prospects to establish large-scale mining operations.
CT: Will Bitcoin’s price falling below its prior all-time high for the first time ever have a substantial future impact on the asset’s and industry’s fundamentals?
TE: No, in our view. When dealing with a new commodities and transformational technological asset like Bitcoin, historical parallels are impossible to depend on. Miners generate BTC in exchange for a set of inputs (computing power, capital, and energy), and the output price does not necessarily represent the cost of production.
Mining BTC at scale is essentially similar to producing oil, gas, or other commodities. Drilling technological advancements changed North America’s position in global energy markets.
When oil and gas prices plummeted during the pandemic’s early stages, no one questioned whether we still needed to drive automobiles or heat our homes. Mining helps the blockchain, and proof-of-work computers will allow our grid to move to a green energy future.
We are dedicated to being a creative and positive member in this market as it matures.