Ether Drops Under $4k and Bitcoin to Nearly $56,500 But Mining Remains Immensely Profitable
For Bitcoin mining to be unprofitable, the price of the leading crypto asset has to drop 88.5% more.
Bitcoin is down 16% from its all-time high of $69,000, currently trading under $58,000.
With the decline seen across the crypto market, it has resulted in liquidations and a subsequent resetting of funding rates.
“With the funding rates now declining to neutral levels, it seems to be a healthy balance between long and short demand in the market,” stated Arcane research in a research note.
According to some, some people might be taking profits off the table with “a good battle” going on between longer-term buyers and leveraged speculators.
Meanwhile, the decline in the price of meme coins like SHIB also suggests “flushing out some of the speculation” driven by retail traders, Bloomberg Intelligence analyst Mike McGlone said. SHIB -0.97% SHIBA INU / USD SHIBUSD $ 0.00
$0.00-0.97% Volume 1.44 b Change $0.00 Open $0.00 Circulating 10 t Market Cap 20.59 b 6 d Terra Stablecoin Supply Surges by $5B In Under A Month, Bitcoin in Macro’s Clutches, SHIB Added to Balance Sheet 1 w Twitter CEO & Bitcoiner Jack Dorsey is Out, Ethereum Is In 2 w DOGE Pumps on Elon Musk’s Enquiry to Binance, CZ Strikes Back
“Some cleansing of meme coins might pressure the stalwarts as a necessary part of the evolving, strengthening ecosystem.”
“We say the sooner the better for the speculation machine coins to experience some purging, so as to move on with the adoption process of crypto assets in investment portfolios.”
However, the bull run market is not over yet as MVRV, which measures the ratio between BTC’s market cap and realized cap, is still far from prior highs, which indicates BTC still has more room to run.
The dollar meanwhile has been rallying since June’s FOMC meeting, hitting a 16-month high on Tuesday on the back of growing expectations for tighter monetary policy on the horizon.
“A stronger greenback would have you believe the same tailwinds that propelled global asset prices – including BTC and crypto – over the last 18 months are starting to reverse course, and that assumption wouldn’t be entirely misguided,” noted Delphi Digital.
But for Bitcoin mining to be unprofitable, the leading crypto asset has to drop significantly, as much as 88.5% more.
This is because for North America’s largest crypto mining company, Marathon Digital Holdings, the breakeven rate on Bitcoin after factoring in energy and hosting costs, is $6,500, according to its CEO Fred Thiel.
“It’s obviously a very profitable business,” Thiel said on Bloomberg’s “QuickTake Stock”. “We can tap into this market for quite a long time. Bitcoin would obviously have to drop 80% before it becomes a tough spot for us, so we’re pretty comfortable with where our costs are right now.”
According to data compiled by crypto derivatives provider FRNT Financial Inc, Marathon has one of the lowest mining costs per coin.
As we reported, Bitcoin miner Hut 8 was mining Bitcoin at a cost of under $3,000 per BTC in Q3, when it first achieved its delivery of cutting-edge GPUs, 10,000 NVIDIA chips, “delivering margins of approximately 95%.”
In Q3, Marathon increased its hash rate to 2.7 exahashs per second and generated 1,252 BTC, a 91% jump from the previous quarter. The company is expecting to have 130,000 machines previously purchased to be commissioned by mid-2022.
It is currently planning to raise $650 million by selling convertible bonds and to use the proceeds to modernize its mining equipment and even fund acquisitions.
“Having cash on the balance sheet allows us to take advantage of opportunities to buy more miners, or we could potentially acquire mining companies, we could invest in technologies that could significantly reduce or improve the energy efficiency of our mining operations,” Thiel said. “We want to be agile, we want to have optionality.“