Can Bitcoin Mining Companies survive in 2023 after the downturn in 2022?

For Bitcoin Mining, 2022 proved to be a challenging year; from the hikes in interest rates and an increase in the cost of capital, the mining of Bitcoin has become a less profitable one as hash rates have continued to shoot upwards while the price of Bitcoin has continued to go on a downward spiral and the several strategies of mining companies to stay afloat have all failed.

However, this does not mean that this is the death of Bitcoin, nor does it mean that public mining companies will become extinct. Most importantly, it means that the mining space is in the middle of restructuring and a strategy rationalization that will help build the mining industry and put it in a better condition than it previously was.

The problem with bitcoin mining has been that the miner has opted to hold onto the bitcoin they mined instead of financing their operations with debts and other capital they could find. This method would be a great one if the price of bitcoin were increasing, which would increase the fear of missing out from the general public, the cost of capital would also be affordable, and this would help increase the number of people looking to get involved with bitcoin for the sake of getting yield is higher. These methods have been great for the past few years. Mining companies were not making money off bitcoin mining but instead from the financing of bitcoin mining. 

The public mining companies are currently struggling, but even during the struggles, there is hope, as mining companies only choose to mine at a time when it is profitable. When it isn’t, the mining machines run by these public mining companies can be turned off and turned back on quickly. It is, however, impossible for these mining companies to shut down operations based on the daily price predictions of bitcoin and electricity. Miners instead choose to mine constantly through market vacillations. This pushes for the need to practice a treasury management system beyond holding already mined bitcoin. 

The best strategy would be one that would involve a sort of exchange of a portion of the already mined bitcoin to aid the funding of operations, as the price of bitcoin could fluctuate alongside the cost of electricity going up, or both could happen at the same time. While this strategy could reduce the chances of mining companies holding onto as much bitcoin to be sold at an increased price during a bullish market trend, it would enable the mining businesses to handle the stress that comes with the market more efficiently and with ready funding. 

The mining companies that can survive the current bearish trend that has plagued the crypto market since 2022 can significantly impact and change the mining market from how it currently is after the restructuring is done. However, this will only be possible if the bitcoin mining companies rethink the path of holding onto more bitcoins and collecting debts or other capital instead of using their already mined bitcoin to get funding.

One major struggle the bitcoin mining market may have experienced in 2022 was a lack of funding, which could have been adequately controlled or managed if they had made use of the funds from their already mined crypto instead of seeking funding from other sources which have been tight with the harsh crypto winter plaguing the entering market and the collapse of several lending firms.

Simply put, there’s still a long way to go for crypto mining to no longer have a future or to collapse. When Bitcoin mining began, miners had the chance to earn 50BTC in 10 minutes from the comfort of their homes; those who were able to hold onto a block of Bitcoin over the years had almost $ 1 million worth of BTC in their wallets in 2022.

Today, miners are rewarded with 6.25BTC. Due to the concept of Bitcoin halving that was set in place by the creator, the reward would then reduce to 3.125BTC in 2024 after the next halving takes place, which means there is an almost secure future for bitcoin mining. 

Conclusion

Not even the downturn of 2022 can single-handedly destroy the bitcoin mining market. However, it still has an air of stability, and it could have a longer future if the funding strategies are reviewed to better mirror the state of the current crypto market.