2022 has been an exceptionally rough year for the crypto market, and the last few months of Bitcoin’s (BTC) price action could be a sign that bears ar
2022 has been an exceptionally rough year for the crypto market, and the last few months of Bitcoin’s (BTC) price action could be a sign that bears aren’t even close to being ready to let up. Crumbling crypto prices also equate to diminishing profits for Bitcoin miners and this week’s regulatory action by the United States lawmakers requesting energy consumption data from four major BTC mining companies is bound to exert a bit more pressure on an already fragile situation.
Despite the increasingly bearish climate, most of the Bitcoin miners Cointelegraph has spoken to are incredibly optimistic about Bitcoin’s short and long-term price prospects.
Chiming in with similar sentiments, Canaan senior vice president Edward Lu spoke with Cointelegraph head of markets Ray Salmond about how industrial Bitcoin miners have matured and the new synergies they have created with the oil and gas and big energy sector in the United States and the Middle East.
Ray Salmond: Edward, what’s happening in the mining industry right now, from your point of view?
Edward Lu: Wow. This is a really big question. A lot of things are happening in this industry, especially in recent months. If you’re looking at Bitcoin dropping a little bit and coming back to stabilize in terms of days, it looks like the cycle is shorter than what we expect. I think by the end of the year, the price will be a bit better, going up a little bit. In the mining industry, you can see a lot of activities happening.
I remember that before last year, China and the U.S. market were the two major markets for mining, a mining’s generating hash rates, and then the Chinese miners moved out of the country to Kazakhstan in the first phase. And then starting from the beginning of this year, we see a lot of movements toward the U.S. market, and obviously, we see a lot of activities happening where you are in the state of Texas.
The availability of cheaper electricity, comparatively speaking, and also friendly policies and as well as engineers. There are decent, well-trained engineers in those industries. So really, a lot of things are happening in the mining industries.
RS: Electricity prices are soaring in the European Union and the United States, and at the same time, Bitcoin continues to trade near its 2018 all-time high. ASIC prices are also down roughly 70%, and it appears that for some miners, the cost of mining outweighs profitability. What are some of the capital expenditures (CAPEX) and operational expenses (OPEX) considerations that industrial miners have in this current climate?
EL: Well, yes. But if you look in the long term, the mining industry is a healthy and profitable business. Even if you look at these days in the short interim, sure, there is a small drop. The Bitcoin price and the energy price are increasing. But again, if you’re looking at CAPEX, OPEX or the profitability of the mining industry, there are many things combined together.
Of course, number one is your machine cost. Number two is your energy cost. Number three is your infrastructure cost. Number four is your OPEX for daily maintenance. But to the best of my knowledge, if you’re looking at today’s machine efficiency and today’s market, the average price of energy, and the average price of your OPEX, then Bitcoin price needs to not drop below $15,000 for miners to continue making a profit.
RS: The next Bitcoin halving is in about 590 days. What impact does this have on the efficiency of ASICs in the range of 110 TH/s to 140 TH/s? Can you speak about the reward for mining becoming smaller, yet the energy required to produce 1 BTC being higher? How could this dynamic change as production costs rise?
EL: The machines will keep improving. We’ll be more efficient when the technology develops. Of course, Bitcoin has been designed in a way that every four years, that reward is halved so that it becomes less and less — but it doesn’t mean that your profit will become less and less. If you look at the history, each halving happened every four years, and the business is still growing healthily. Mining industries keep growing. The profit depends, as I said earlier, on a lot of things. Of course, your machine costs, your infrastructure cost, your OPEX, CAPEX and also your energy costs. And of course, the last thing — which is pretty important — is the Bitcoin price. So, there are many things together. I don’t see this trend becoming smaller and smaller. I think this industry will still keep on going as well as we have gone through in the past. It’s a healthy, profitable business for mining industries.
RS: Is it incorrect to assume that with each having, ASICs must become more powerful and therefore use more power?
EL: No. It’s not right, to be honest. If you look at the machines and technology, even if it is going to have 100 TH/s, 120 TH/s or 140 TH/s, the consumption power versus the terahash — which is the efficiency we call per joule per TH/s — is becoming less…
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