Paradoxical growth of Bitcoin hash rate against the background of price collapse and stagnation, Ethereum's transition to Proof-of-Stake and the first major bankruptcy of a mining company. What else was the year 2022 marked for the cryptocurrency industry.
- The share of state-owned companies in mining reached 25%.
- Increasing complexity, falling prices and the energy crisis have destroyed the income of miners.
- The first major bankruptcy in the crypto market.
- Ethereum abandoned mining with the transition to the Proof-of-Stake algorithm.
- Russia has dropped out of the top three Bitcoin mining leaders.
Bitcoin Hashrate Hits New Highs Despite Bear Market
Since the beginning of the year, Bitcoin's hash rate has increased by about 58%, from 172,8 EH/s to the November peak of 272,4 EH/s. After that, the indicator slightly adjusted.
According to the data According to the Cambridge University Center for Alternative Finance (CCAF), the United States remained the leader in terms of mining power, increasing its lead to 37,8%.
In turn, China failed to completely block mining in the country. Already in September 2021, CCAF experts recorded the return of the relevant share, which reached 21,1%.
The second place in the rating was Kazakhstan — 13,2%. Russia dropped out of the top three (4,7%), giving way to Canada (6,5%).
Specialists of the organization presented the geographical distribution of forces as of January 2022. Therefore, one can only speculate how the consequences of the event and trends caused the hashrate migration.
Miners operating in the US and Canada actively increased capacity. Kazakhstan faced with serious outflow representatives of industrial mining due to problems with energy supply and proposed amendments to the tax legislation.
In terms of pools, Foundry USA remained the leader, which increased its share in the Bitcoin hash rate from 17% to 26,45% over the year. The structure continued to dominate despite the emerging financial problems in parent company Digital Currency Group.
It was followed by AntPool, F2Pool and Binance Pool. These platforms have also increased in capacity. For example, the share of AntPool has increased by almost 5% since January. As a result, 75% of Bitcoin's hash rate turned out to be under the control of the leading four.
Hashrate Index analyst Jaran Mellerud explained the paradoxical growth of the numerical capacities of the network against the background of the bear market by the investments of public miners in equipment during the last cycle. The share of such players in the hash rate for 12 months increased from 10% to 25% .
Capriole Investments founder Charles Edwards issued an alternative opinion . The expert expressed confidence that the maximum hashrate is connected with the entry into mining of large oil and gas companies.
With the increase in network power, the correlative difficulty of mining reached new record highs. At the end of November, indicators reached a historical maximum in 36,95 tons.
Miners faced the problem of servicing loans
Increasing complexity, falling Bitcoin prices, and rising tariffs due to the energy crisis put serious pressure on mining profitability throughout the year. The sector players' income in November decreased to $461 million ($1,2 billion in January).
In November, the hash price updated its historical low from $0,058 per 1TH/s. The metric shows the income of miners per unit of measured power.
At the beginning of summer, public miners eliminated a significant part of the accumulated reserves in cryptocurrency. Despite this, in Arcane Research counted their financial situation is stable.
In September 2022, the industry experienced its first major bankruptcy. Application for insolvency filed by a private mining company and infrastructure provider Compute North.
Already in October, publicly traded Core Scientific warned about the risk of withdrawal of financial reserves by the end of the year and possible bankruptcy. In December, the company filed for Chapter 11 protection from creditors for business reorganization.
The Hashrate Index notes that the company's problems are fully explained. Experts analyzed the ratio of long-term loads and liquid assets of the largest public miners. In Core, the indicator turned out to be an order of magnitude higher than in the others — 24.
UK-based Argo Blockchain also announced possible termination of operations due to a lack of funding, according to the metric, Greenidge and Stronghold are also potentially at risk.
During the growing market of 2021, companies actively took out loans to buy equipment, in many cases against its collateral. Bloomberg estimated the volume of existing assets under threat of liquidation in the amount of $4 billion .
According to the agency, the largest lenders were NYDIG, Celsius Network, BlockFi, Galaxy Digital and Foundry. During the year, some miners started return tens of thousands of installations that cannot be serviced due to debt.
The events unfolded against the background of a sharp drop in equipment prices — more than 80% during the year. According to the hash rate index, in January devices with energy efficiency above 38 J/TH cost approximately $101, by the end of the year the indicator fell to $18 . In Foundry confirmed this assessment.
Payback periods for installations purchased at peak prices in current market conditions have increased many times. Experts have estimated that it will take about 19 years to recover the cost of the Antminer S9j Pro purchased in January.
Intel entered the mining ASIC market
The falling market also hit mining equipment manufacturers. According to the results of the third quarter, Canaan reported a net profit of $8,6 million. Indicator collapsed by 90% in relation to the previous period.
At the same time, Chairman and CEO Nangen Zhao confirmed that the drop in income is due to price adjustments under existing contracts — the company has fulfilled the planned physical sales volumes.
During 2022, Canaan managed to introduce two new lines of bitcoin miners. At flagships 12 series the detected energy efficiency was 35 J/TG, in top devices 13 series — already 25 J/TG.
In April, MicroBT presented the Whatsminer M50 line. The relevant characteristic of the leading miner M50S was 26 J/TG.
Bitmain continued to expand the offer models of the S19 series. Its flagship provides energy efficiency of 21,5 J/TG.
According to analysts, the transition to more efficient hardware has become one of the factors in the growth of Bitcoin's hash rate in 2022. At the same time, the consumed power of the network fell during the period from ~9500 MW to ~8400 MW, according to Hashrate Index.
Against this background, in the sector of manufacturers of mining equipment, dominated by the above-mentioned Chinese companies, a new potentially large player has emerged - the American Intel.
In February, the corporation introduced the Bonanza Mine chip to mine the first cryptocurrency. The presentation was purely technical, but the experts drew attention to the clear energy efficiency — only 55 J/TG.
One of the first customers the chip became GRIID Infrastructure. The last time, in documents for the SEC, it was revealed that it is planned to receive from Intel devices with much higher characteristics — 26 J/TG .
In April, Intel confirmed that the indicator corresponds to the second generation device called Blockscale.
In July, the corporation announced the start of deliveries chips to the first customers. They also included Argo Blockchain, Block and HIVE Blockchain. The last received the first 262 installations in November.
Ethereum has switched to Proof-of-Stake. Altcoins could not accept all the miners
September 15 developers activated major update The Merge on the Ethereum network. The blockchain has switched to a Proof-of-Stake (PoS) consensus algorithm.
According to 2Miners, the hashrate of the network at that time was about 740 TH/s. The second part of cryptocurrency capitalization miners are waiting to switch to altcoins that can be mined with the help of GPUs.
The network seriously benefited from the influx Ethereum Classic, the capacity of which jumped from 55 TH/s to 290 TH/s. Against the background of migration, the hash rate of Ravencoin, Ergo and Beam coins also increased.
However, in the near future, miners began to disconnect equipment from new mining networks... Apparently, for many altcoin mining was not profitable enough to cover costs. Already by the end of September, the mass media reported about the sharp falling prices on video cards in China.
Since October, Ethereum Classic hashrate has stabilized in the range of 150-130 TH/s with a downward trend. A similar trend was demonstrated by other networks that saw an influx of players after The Merge.
Neglected no problem fork Ethereum PoW turned out to be quite unpleasant for miners. At its peak on September 15, the network capacity reached 68 TH/s, by the end of the year the indicator fell below 19 TH/s.
Conclusion
According to Hashrate Index experts, the current crypto winter has not become a more difficult test for Bitcoin miners than before. For example, during the medical crisis of 2020, the income per 1 kWh fell to $0,083. Now the minimum is recorded at $0,108 (with half the duration of the unfinished cycle).
Analysts believe that North American miners will further increase the fortune in the hashrate of the first cryptocurrency. Regional players continue to receive multi-thousand batches of contracted modern equipment and develop infrastructure.
All public mining companies in aggregate are likely to grow as well. However, this process has slowed down — since the beginning of the year, shares have lost up to 90% of their value.
But for some companies, the crypto winter has become an opportunity to purchase the assets of competitors (CleanSpar, Crusoe, Foundry and others) with a significant discount or with minimal costs to increase the hashrate due to discounts from equipment manufacturers (for example, TeraWulf).
According to the forecasts of many experts, the decline of the market will end in the spring of 2023. This is indicated by the duration of similar previous periods.
