Bear Market Outlook: Public Bitcoin Mining Companies And Their Profitability

As the market inches towards what looks to be a bear market, bitcoin investors are looking towards other blockchain avenues to weather what is expected to be a long winter. Public bitcoin miners are one of the avenues that grew to prominence through the bull rallies of 2021. The growth of the value of their stocks during this time had drawn investors to them, and as the market slows down, we take a look at which of these public miners are best positioned to weather a crypto winter.

Looking At The Companies

There are currently a number of companies that dominate the public bitcoin mining space. Among these are popular ones such as Marathon, Core Scientific, Riot, etc. Now, all of these companies have been badly hit since bitcoin had begun to decline. However, some have managed to shoulder the decline in interest better than others. This is apparent in their market caps even after recording more than 50% in losses from their peaks.

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To determine which of these are best prepared for a bear market, we take a look at their energy prices. Electricity is the bedrock of crypto mining and is often the highest running cost of any miner. So the lower the power costs, the better.

Among the top public mining companies, Riot has emerged as the company with the lowest power prices. The company only pays $24 per MWh according to recent data, meaning it has the lowest electricity running cost of the top 5 companies. It also boasts the lowest debt relative to equity which is currently sitting at a 0.1 debt-to-equity ratio. Marathon, however, has a debt-to-equity ratio of 1.0 meaning it possesses more liquidity compared to Riot.

BTC settles above $31,000 | Source: BTCUSD on TradingView.com

Interestingly, none of these companies possess the largest market cap. That title belongs to Core Scientific with a $1.370 billion market cap. Marathon comes in second place with a $1.092 billion cap, and Riot is in the third position with $920 million in market cap. 

When measured on an overall scale, Riot emerges as the company best suited to weather a bear market. Its lower power cost and healthy balance sheet puts it in a unique position to spend less on its activities compared to competitors and still pull in a profit.

The Best Bitcoin Miners

The mining machines used by bitcoin miners can often determine their profitability. Cash flow from the leading bitcoin miners have dropped by more than 50% from its peak but still remains at a favorable point. The first is the Antminer S19 which had a cash flow of more than $50,000 per BTC at the height of the bull rally last year. But as of the end of May, the profitability of this miner has since dropped to $23,000 at the current bitcoin price of $31,000.

Cash flow from miners drop | Source: Arcane Research

The Antminer S9 is not faring well either. At current prices, this mining machine is seeing a cash flow of $8,000 per BTC mined. This shows how quickly the mining profitability is dropping causing concerns regarding the future of this space.

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If the production cost continues to go up and cash flow from the miners continues to drop, then a number of bitcoin mining companies will not make it through the bear market. What will result will be a number of bankruptcies due to increased M&A activity.

Featured image from GOBankingRates, charts from Arcane Research and TradingView.com

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