Bear Market Outlook: Public Bitcoin Mining Companies and Their Profitability

As the market nears what appears to be a bear market, bitcoin investors are turning to other blockchain avenues to weather what is expected to be a long winter. Public bitcoin miners are one of the avenues that have risen to prominence through the bull rallies of 2021. The growth in value of their shares during this period had attracted investors to them, and as the market slows , we take a look at which of these public miners are best positioned to weather a crypto winter.

Watch companies

There are currently a number of companies dominating the public bitcoin mining space. Among them are popular companies such as Marathon, Core Scientific, Riot, etc. Now, all of these companies have been hit hard since bitcoin began to decline. However, some have weathered the drop in interest better than others. This shows in their market caps even after posting more than 50% losses from their highs.

Related Reading | Bitcoin Profitability Hits Two-Year Low on Market Struggles

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

Among the major public mining companies, Riot has become the company with the lowest electricity prices. The company only pays $24 per MWh according to recent data, which means it has the lowest running cost of electricity of the top 5 companies. It also has the lowest debt-to-equity ratio, which currently sits at a debt-to-equity ratio of 0.1. Marathon, however, has a leverage ratio of 1.0, which means it has more cash than Riot.

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

Interestingly, none of these companies has the largest market capitalization. This stock is owned by Core Scientific with a market cap of $1.370 billion. Marathon comes in second with a cap of $1.092 billion, and Riot is in third place with a market cap of $920 million.

Measured on a global scale, Riot appears to be the company best suited to face a bear market. Its lower energy cost and healthy balance sheet put it in a unique position to spend less on its business compared to its competitors while still making a profit.

The Best Bitcoin Miners

The mining machines used by bitcoin miners can often determine their profitability. Cash flow from major bitcoin miners has fallen 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 over $50,000 per BTC at the height of last year’s bull rally. But at the end of May, the profitability of this miner fell to $23,000 at the current bitcoin price of $31,000.

Cash flow from miners drop | Source: Arcane Research

The Antminer S9 is not doing well either. At current prices, this mining machine registers a cash flow of $8,000 per BTC mined. This shows how quickly mining profitability is shrinking, raising concerns about the future of this space.

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If the cost of production continues to rise and miner cash flow continues to decline, a number of bitcoin mining companies will not survive the bear market. This will result in 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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