Cryptocurrency miners seek a financial lifeline with an intense battle for bitcoins

Cryptocurrency miners are turning their machines back on as bitcoin’s surging price offers a vital lifeline for their cash-strapped businesses.

The token’s value has emerged from the doldrums to climb more than a quarter this year against the dollar, incentivizing owners of huge warehouses of mining servers to ramp up their use in the battle to secure more bitcoin.

The average hashrate, or computing power directed at mining bitcoin, rose to a record 280 exahash — or quintillion — operations per second on Jan. 20, according to data from Hashrate Index, a mining intelligence service.

The increase in activity is a sign that the battered sector could be coming back to life after being hit by high energy costs and the falling price of the cryptocurrency. The level of activity has more than doubled from its low in July, when the cryptocurrency market was hit by a credit crunch.

Miners challenge each other to solve cryptographic puzzles that validate batches of transactions and create new blocks in the blockchain, a ledger of business. This makes them the guarantors of the reliability of bitcoin transactions in a system that bypasses third parties such as banks and exchanges. The winner is rewarded with new coins.

Many are sitting on large amounts of mining equipment and capacity, bought with cheap money in 2021 and early 2022 in anticipation of making a profit from the rising coin price. But bitcoin prices tumbled 65% last year and energy prices soared, forcing many companies to shut down servers to save money. Others, like Core Scientific, couldn’t stand the pressure and filed for bankruptcy.

“The sentiment among miners is better than in a long time,” said Jaran Mellerud, an analyst at Hashrate Index. “For many players threatened with bankruptcy, the sudden increase in the price of bitcoin is a lifeline.”

The rebound has buoyed investor optimism in publicly traded companies like Marathon Digital Holdings, which is up 155% this year, and Hut 8, which is up 134%.

But the miners still face a long period of coming back from the brink. Running their servers is expensive. An algorithm adjusts the “difficulty level” of bitcoin mining as new computers join or leave the network, to ensure that the token is mined at its regular interval of approximately every 10 minutes.

The influx of miners has raised that bar. Now miners take a record 37tn hash or guess before verifying a block, according to, so losers are spending ever-increasing amounts of energy for nothing.

They are also facing a squeeze from politicians around the world, who see miners’ computers suck up vast amounts of energy, drain local resources or damage the environment. Others see the profits they make as a taxable asset.

Canadian provinces British Columbia and Manitoba have blocked new connections to their grids for 18 months, while Hydro-Québec, Quebec’s utility provider, has filed a request to reallocate 270 megawatts of power it had set aside for mining .

In December, Kazakhstan’s lower house, home to the world’s third-largest share of mining, approved a bill that would levy a corporate tax on miners and reduce their energy use.

Paraguay, which has an abundance of cheap hydroelectricity, rejected legislation that would have capped tariffs on miners to 15%.

“Miners are getting very selective about where they build their infrastructure,” said Joe Burnett, an analyst at mining consultancy Blockware Solutions. “A few years ago people were really just focused on cheap energy, but now it’s become much more critical to look at which political jurisdiction is more supportive and won’t shut down our operations.”

The miners say they have become an unfair target. The Bitcoin Mining Council, an industry group, estimated in July that just under 60% of global mining energy use was sustainable, though the Cambridge Center for Alternative Finance puts the figure at around 37%.

“There is a false environmental argument against the mining industry,” said Samir Tabar, chief strategist at Bit Digital, a mining company with operations in New York, Texas, Nebraska and Georgia. “It seems that whatever bitcoin miners do, even if we use 100% renewable sources, nothing goes right.”

Ercot, the organization that manages the Texas power grid, will start a voluntary reduction program for large energy consumers such as bitcoin miners to reduce their energy consumption during periods of high demand, until it develops a permanent scheme to address shortages.

But that tipping point can provide an unexpected opportunity. Miners with power purchase agreements, which lock in the price they pay for power, are able to sell the power back to the grid. Riot and Hive Blockchain earned $4.9 million and $3.1 million, respectively, in December.

“Reduction is the future of mining,” Burnett said. “If it doesn’t make financial sense for mine, you might as well sell [energy] get back to someone.

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