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Bitcoin Miners’ Revenue Drops Below $1B Amid Bearish Market & Increasing Mining Difficulty

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Bitcoin Miners’ Revenue Drops Below $1B Amid Bearish Market & Increasing Mining Difficulty

Bitcoin mining revenue fell under $1 billion in August due to decreasing investor interest, which led to falling prices as well as difficulty in mining the cryptocurrency. 

Bitcoin mining revenue has brought huge profits to crypto firms such as Bitfury, Bitmain, AntPool, Core Scientific Inc., Marathon Digital Holdings Inc., and Riot Blockchain Inc. over the years. 

Within the last four months, starting from May when prices of digital assets reached new lows buoyed by the collapse of the TerraUSD (UST) stablecoin which powered the Terra ecosystem, mining revenue has been on a downward spiral. 

Despite a 10% rise in revenue from $597.35 million in July to approximately $657 million in Aug., per the Block based on data from Coin Metric, revenue from the largest cryptocurrency by market capitalization remained far below the $1 billion threshold miners became accustomed to in 2021. 

Due to how mining revenue is calculated, much of the decline has been attributed to a relatively smaller price range of BTC throughout the eighth month of the year.

Mining revenue is calculated by multiplying the total number of BTC earned as rewards by the price of the digital asset within a given period. In Aug. 2022, BTC traded in the price range of $19,600.79 and $25,135.59 after opening and closing the month at prices of $23,336.72 and $20,049.76 respectively. 

The highest daily Bitcoin miners’ revenue was $24.65 million on Aug. 19, YChart data showed.

Bitcoin miner revenue sees year-over-year low 

Like most months before Aug., BTC saw a yearly decline in revenue. Miner revenue in Aug. 2021 was around $1.4 billion, and total rewards earned from last month was a 53% decrease from this value. Within the period, BTC traded in the range of $37,458 and $50,482, according to data from CoinMarketCap

Mining difficulty has also affected profitability 

Bitcoin became extremely harder to mine last month. BTC mining difficulty spiked by 9% over the last three weeks, from 28.17 trillion on Aug. 4 to 30.98 trillion on Aug. 31, BTC.com data showed. 

While difficulty in mining indicates a strong and growing network, it also leads to slimmer profits as more computing power is needed, but the value of the coin remained below $26,000. 

BTC Market Capitalization Shed More than $60 million 

The market value of BTC continues to fall, and August was no different. After making several attempts at recovery in July, BTC opened on Aug. 1 with a market capitalization of $445.23 billion, plunged by 13%, and closed the month with a new market value of $383.71 billion. This saw $61.82 billion wiped off within 30 days. 

Why are miners turning away from BTC?

With Ethereum’s transition to a Proof-of-Stake (POS) network, Bitcoin should remain the sole Proof-of-Work (PoW) coin. Miners should be rushing to mine BTC, but why are revenues far below expectations?

Ilman Shazhaev, CEO of Farcana (blockchain gaming Metaverse) told BeInCrypto, “Currently, the most efficient equipment on the Bitcoin mining market at average electricity rates shows a 50/50 profitability. That is, 50-60% of the profit goes to the electricity bills, and the rest stays in the hands of miners. These figures are not bad: for example, Ethereum is withdrawing from its usual mining scheme. With the relatively low price of Bitcoin, the network complexity remains relatively high, which was unexpected for the whole mining market. Current Ethereum miners will only switch to Bitcoin after the PoS transition if the network complexity decreases to what it was in mid-2021 and if the market becomes bullish.”

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Grayscale Launches New Investment Product While Bitcoin Trust Crashes to 35%

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Grayscale Launches New Investment Product While Bitcoin Trust Crashes to 35%

Grayscale Investments is offering investors an opportunity to invest in Bitcoin mining hardware in the bear market.

The new investment opportunity, called the Grayscale Digital Infrastructure Opportunities LLC (GDIO), is now open to qualified individual and institutional investors, even as the asset manager allows ETF-related court proceedings to run their course.

Grayscale putting capital to work

Grayscale will use investor capital from the GDIO to buy mining hardware for a minimum of three years. It will use the hardware to mine and subsequently sell bitcoin. Mining is the energy-intensive process undertaken by a computer network to create a new transaction block and verify it. The node in the network that creates the block is known as a miner. A miner is rewarded in bitcoin for his effort, which typically requires large amounts of cheap electricity and computing power.

Part of the proceeds Grayscale will earn from its efforts will be paid out quarterly to GDIO investors.

“Grayscale’s unique position at the center of the crypto ecosystem enables us to create offerings that allow investors to put capital to work through differing market cycles,” stated Michael Sonnenshein, Grayscale’s chief executive.

GDIO represents another way the company has sought to provide investors with exposure to bitcoin without directly holding the asset.

Investors can also purchase shares from its GBTC trust and gain exposure to bitcoin through Grayscale’s legally regulated business in the U.S.

But Grayscale has a problem. Because investors cannot redeem shares in the trust for bitcoin, the price per share has dropped drastically, trading at a discount of 35% to its Net Asset Value. 

At the close of the trading day on Oct. 5, shares were trading at a shade over $12, despite being backed by $18.45 worth of bitcoin.

To mitigate this discount, Grayscale has pursued the conversion of GBTC into a spot bitcoin exchange-traded fund, which has so far been unsuccessful. The U.S. Securities and Exchange Commission denied the company’s latest application in June 2022, prompting Grayscale to pursue legal action against the federal agency. 

Nic Carter of Castle Island Ventures, a venture capital firm focused on early-stage public blockchain startups, said that Grayscale could wind down the ETF:

watching the GBTC discount. looks like ATL at -35%. on top of discounted spot BTC. paths to breaking open the piggy bank: SEC can approve ETF conversion, or Grayscale can wind down the trust themselves if they so choose.

— nic carter (@nic__carter) June 17, 2022

The SEC maintains that spot bitcoin ETFs are prone to underlying market manipulation.

Grayscale undeterred by SEC rejection

Despite consistent resistance from U.S. regulators, Grayscale launched its first European ETF in May 2022, which tracks the Bloomberg Grayscale Future of Finance Index, offering customers exposure to institutions at the crossroads of finance, technology, and cryptocurrencies.

Grayscale raised investors’ eyebrows recently when it announced that it had applied with the SEC to distribute 3 million ETHPoW tokens that were distributed to all Ethereum (ETH) holders after the controversial proof-of-work fork went live. 

At the time, Grayscale said it was seeking the rights to sell the tokens and pay out shareholders. 

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Colorado is accepting crypto for tax payments — it could be a mess or a shining example

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Colorado is accepting crypto for tax payments —  it could be a mess or a shining example

Colorado is now accepting crypto for tax payments — but if you choose to use that option, it could change the amount you owe…
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BNB Chain confirms BSC halt due to ‘potential exploit’

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BNB Chain confirms BSC halt due to ‘potential exploit’

Rumors of a significant hack on the BNB Chain were confirmed by the blockchain’s team, with all deposits and withdrawals suspended on the network…
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