A phase when there’s a flush­ing out of the mar­ket

Sunday Tribune - - KZN - Bloomberg

ONE OF THE con­se­quences of the re­cent rout in Bitcoin is well un­der way. And it’s likely to have a pro­found ef­fect on the lead­ing cryp­tocur­rency.

There is a con­sol­i­da­tion go­ing on among the so-called min­ers that per­form the com­plex cal­cu­la­tions to gen­er­ate the dig­i­tal cur­rency af­ter the plunge ren­dered many of them un­prof­itable.

At least 100 000 in­di­vid­ual min­ers have shut down, ac­cord­ing to Au­ton­o­mous Re­search. Fund­strat Global Ad­vi­sors es­ti­mates that about 1.4 mil­lion servers have been un­plugged since early Septem­ber.

“We are en­ter­ing in the phase when there’s a flush­ing out of the mar­ket,” said Malachi Sal­cido, head of We­natchee, Wash­ing­ton-based Sal­cido En­ter­prises, which claims to be one of the largest min­ers in North Amer­ica, with 22MW of power de­ployed and 20MW more be­ing built.

“There will be rel­a­tively few op­er­a­tions that come out the other side.” Most min­ers are only prof­itable when Bitcoin trades above $4 500 (R61 636). It hasn’t closed above that level since Novem­ber 19.

Late last year, Bitcoin traded for al­most $20 000.

Only a se­lect few can af­ford to stay in the game: min­ers with scale, very spe­cific busi­ness mod­els and ex­tremely low elec­tric­ity costs, as in Dou­glas County, Wash­ing­ton, where most of Sal­cido’s op­er­a­tions are based. Mar­gins be­fore costs like de­pre­ci­a­tion and taxes dropped from about 40 to 20 per­cent dur­ing the slide, Sal­cido said.

They jumped back up at the com­pany to around 40 per­cent as smaller ri­vals shut­tered op­er­a­tions, he said.

With the so-called hash rate – or min­ing power on the Bitcoin net­work – down 36 per­cent from its all-time peak this Au­gust, prob­lem­solv­ing dif­fi­culty has dropped about 10 per­cent, mak­ing it eas­ier for the re­main­ing min­ing rigs to earn Bit­coins. |

Bloomberg

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