Crypto miners were hit hard by the downturn of the digital asset industry

crypto mining companies are under strong pressure from this year's downturn among digital assets, since the high energy costs and the falling price of coins push more names to the financial cliff.

The company Core Scientific, which was listed on the Nasdaq, warned last week to apply for bankruptcy protection, since its cash would be used up by the end of the year. On Monday, the Argo Blockchain, listed in London, repeated these gloomy prospects and said that it could be forced to hire the company after an important procurement of funds failed.

These warnings came only a few weeks after the US company Computer North, the data center services for miner operation, registered bankruptcy because it was in debt of up to $ 500 million and held the difficult market conditions for this.

Your dark financial situation shows how crypto mining-the process that generates coins and transactions is verified-will not be felt the effects of crashing the price of popular cryptocurrencies such as Bitcoin in the past 12 months.

The downturn has already affected a number of once prominent crypto companies such as the Celsius Network and Three Arrows Capital credit platform, the hedge fund.

"The crypto winter has a negative impact on the entire ecosystem, including the miner. It is a chain reaction while this long cold crypto winter lasts," said Dan Ives, Managing Director of Wedbus Securities.

industry analysts and managers have questioned the sustainability of the mining, especially after the prices of the leading tokens have been in a range since June. Bitcoin rarely increased over $ 21,000 after it had reached a maximum of almost $ 70,000 at the end of last year.

miner play a crucial role in the operation of so-called "proof of work" token like Bitcoin. They verify new blocks on blockchains and effectively take on the role as a guarantee that shops in a system are trustworthy that deals with third parties such as banks and stock exchanges. In return for mining, you will be rewarded with new tokens. Ether, the second largest crypto token in the world, recently removed the type of system that miners required.

Many miners were attracted by the constantly increasing prices for coins. When the Bitcoin Prize crashed in 2021, companies put money in buying mining equipment, including fast computers that use large amounts of electricity. Hut 8, a mining company, added 9,592 machines for the mining in the first quarter of 2022 and increased its capacity by almost a third.

The additional mining capacity has just arrived on the market when the price fell, which means that the miners struggle hard to win the token. According to Hashrate Index, the entire Hashrate of Bitcoin, the computing power focused on mining, has increased by 57 percent last year to a record of 260 exahash or quintillions - operations per second.

The high energy costs also caught many and nailed the ambitions of the mining workers. Miners compete against each other to solve complex mathematical puzzles and earn Bitcoin. They consume large amounts of energy, regardless of whether they claim Bitcoin in front of their competitors or not. Argo admitted that the energy costs for his system in Texas were almost three times as high as the average price for August.

In addition, there is a risk of power failures in the USA. In July, Argo, Core Scientific and Riot Blockchain reduced their business in Texas because the demand for energy threatened to overwhelm the power grid.

"The bottom line has increased the competition lately, although the electricity costs are high and the Bitcoin price is quite stable. He remains positive over some miners, including Stronghold Digital Miningdas last year.

The conditions cannot improve at short notice. Since the Ethereum "Merge" in September made Ethereum mining effectively obsolete by switching to another system for transaction verification, companies such as Hive and Hut 8 said that they planned to fill their capacities with Bitcoin mining.

In addition, it is expected that the rewards for the mining of Bitcoin will halve in less than two years, in a four -year event that is preset in the code of Bitcoin.

"The only way for Miner to increase their Bitcoin production through the upcoming halving is to increase capacity much faster than their competitors," said Jaran Mellerud, an independent crypto-mining analyst.