Canadian crypto mining giant Bitfarms has reneged on its hodling strategy and is instead selling 3,000 bitcoins for $62 million amid a recent market rout squeezing miners’ profitability.
The CFO of Bitfarms, Jeff Lucas, said that despite the sale, Bitfarms remains bullish on long-term price increases and is focused on maintaining BTC liquidity through its mining operations as it anticipates better economics.
He also said that the company had been undertaking various financial measures to fund growth and operations since Jan. 2021, but that selling bitcoin is the cheapest method of raising liquidity in the current market.
The recent sale and $37 million in financing for new equipment saw $100 million of liquidity injected into the company. Bitfarms used part of the money to reduce the indebtedness of $66 million to Galaxy Digital LLC by $28 million to $38 million. The company mines, on average, about 14 bitcoins per day.
Mining stock prices take a beating
Mining companies have had to rethink their operational and hodling strategies amidst turmoil in the crypto market, with Toronto-based Bitfarms amongst many mining giants facing dwindling capital injection via stock markets as share prices fall. Its stock price fell from $4.27 on April 12 to $1.83 at the time of press.
Riot Blockchain, one of the oldest and most prominent mining companies based in Colorado, USA, has seen its stock price plummet from about $23 per share on March 28, 2022, to around $5.30, while shares of Marathon Digital Holdings, another mining heavyweight, have reached a three-month low of $7.41 from approximately $31 in late March.
Smaller BTC miners face dual challenges to maintain profitability
While Bitfarms uses 99% renewable energy via a long-term power contract and is hence less vulnerable to energy prices eating into profits, the mining revenue from newly minted coins and transaction fees dipped to an almost yearly low of $14.4 million on June 16, 2022. The previous trough was reached on June 27, 2021, with just over $13 million in revenue.
As Charlie Schumacher from Marathon Digital told the Financial Times recently, smaller miners face the two-fold threat of lower bitcoin prices and rising energy costs. As a result, some have canceled orders for new mining machines.
While larger miners like Bitfarms have fixed energy costs and, in the case of Bitfarms, 3,349 bitcoins on its balance sheet, smaller miners like Xive have had to shut down certain operations when bitcoin fell below $25,000, according to its co-founder Didar Bekbaouov.
Data from Blockchain.com corroborates the theory of an overall falling mining hashrate. The total computing power required to mine new bitcoins has fallen from 231.428 exahashes/second on June 12, 2022, to 206.4 EH/s at the time of writing, indicating that miners are slowly but surely dedicating less computing resources to receive fewer bitcoin.