Bitcoin Rally Is Much-Needed Lifeline for Troubled Miners After Grim Quarter
Bitcoin's new year rally is resuscitating many crypto-mining companies seeking to escape from near financial ruin after one of the most devastating quarters ever for the nascent industry. Whether they succeed in making a comeback remains in question.
High electricity costs, a plunge in digital assets prices and persistent network competition in the fourth quarter slashed mining profit margins and made it difficult for miners to stay afloat. Core Scientific Inc., the largest public Bitcoin mining company by computing power, went bankrupt and multiple major miners warned of liquidity crunches. While struggling miners have garnered some relief from Bitcoin's 40% rebound this year, they are still under financial pressure.
The rise in Bitcoin has made it easier for miners to raise capital from the equity market after debt-financing opportunities dried up and interest payments outpaced cash flows in the quarter. Miners such as Marathon Digital Holdings Inc. and Riot Platforms Inc. have been among the best performing US stocks this year, gaining more than 75% each after tumbling in value in 2022.
“Public market investors are not typically those that look at hash price and mining machines,” said Ethan Vera, chief operations officer at crypto-mining services firm Luxor Technologies, referencing industry terms used to calculate miners' revenue. “Their investing is based on the price of Bitcoin.”
Marathon is forecast to report a fourth-quarter loss after the close of regular trading Tuesday. The Las Vegas-based miner has already registered a net loss of $280 million on revenue of about $89 million through the first nine months of 2022.
In the most recent quarter, Greenidge Generation Holdings Inc. was able to push back a deadline to
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