Bitcoin mining companies are increasing capacity, ahead of a potential return to profit for the industry. All signs point tentatively towards the current bear market drawing to a close.
The bear market for bitcoin and other cryptocurrencies has been causing problems for mining firms for over 18 months. But now there are signs of a reversal in fortunes on the horizon. Consequently, a number of mining companies are stepping up their efforts to increase capacity. In particular, bitcoin miners in China. These Chinese businesses represent the world’s largest bitcoin mining firms.
They are now banking on a cheap hydroelectric energy boom, which they expect will make mining cheaper.
At the same time, a turnaround in bitcoin markets is expected to lead other cryptocurrencies north. Naturally, this will be to the benefit of all those engaged in mining activities.
Crypto mining is the energy-intensive process of discovering new bitcoins. Miners run computer processors to uncover new tokens. However, the process relies on significant amounts of energy and hardware capacity.
With crypto prices trending downwards for the last year and a half, and energy prices rising across the board, mining firms have found it difficult to mine profitably. As a result, a number have laid off staff, closed their facilities and even filed for bankruptcy protection.
Ahead of the Chinese rainy season, though, mining firms are banking on a positive double whammy. Namely, cheap hydroelectric energy and rising prices to pull them back into profitable territory.
Mining company Hashage of Chengdu in Sichuan is one firm anticipating a return to profitable territory for miners. They are predicting a fall from $0.052 per kWh to $0.037, representing a substantial saving at scale.
Co-founder Yun Zhao said that during bull market conditions, it was difficult to obtain mining equipment or capacity in mining farms. Especially, with energy prices low on the list of priorities. However, given current dynamics, energy costs are now a make-or-break for operators.
“In the bullish market, it was hard to buy mining equipment, it was hard to find available slots in mining farms, because the electricity cost wasn’t too big of an issue. In the bearish market, we’ve got to huddle together and find better ways to utilize our resources.”
Tyler Xiong of mining pool Bixin expressed similar views. He said it was now up to mining firms to access the cheapest energy possible to benefit from the recovery.
“In this round, the market’s dominance will shift to miners and whatever farms that can get the cheapest electricity cost. They are the ones that can really rock.”