Bitcoin mining does not stop for a second, but the outgoing year 2022 was not the luckiest for it. However, this only means that a much better time is waiting for us ahead, and that we need to continue optimizing resources and prepare for crypto spring.
What was happening to mining in 2022? Let's go over the most significant trends and prospects.
Let's start with an event that is not directly related to Bitcoin mining, namely the Ethereum transition from the PoW protocol to PoS. The future will show why Ethereum needed it, and what it can give to the industry as a whole, meanwhile, the main consequence of The Merge was that Dogecoin became the second most capitalized cryptocurrency of PoW. (The third one is Ethereum Classic). Bitcoin's position remains unshakable.
On January 2, 2022, the President of El Salvador, Nayib Bukele, announced that by the end of the year the BTC rate will reach $100k. It is difficult to call Mr. Bukele a respected expert, but he should be a realist like no one else, since he is the president of the only state on the planet whose budget is formed by Bitcoins, among other things.
The forecast failed to come true, however, despite the public murmur, Mr. President continues to increase El Salvador’s budgetary position in BTC, taking advantage of the favorable situation. Many well-known strategists and financiers, who can’t be suspected of arrogance, adhere to the same strategy.
At the same time, the now traditional discussions over the PoW consensus shortcomings and the harm caused by mining to the environment have been going on all year in one form or another. So far, we have to admit that society is not ready to loudly and publicly condemn the banking sector or the gold mining industry, or any other global industry, including some related to food production. Their negative contribution significantly exceeds the contribution from Bitcoin mining, and so far this balance isn’t shifting towards the latter.
Meanwhile, all these disputes did not prevent the expansion of large mining companies, whose market share reached a record 19% in Q1 2022 (we are talking about American public mining companies, traded mainly on Nasdaq). In general, this fact and its consequences probably form the most important event in the mining industry, namely:
First, on November 21, 2022, a record of Bitcoin network difficulty was set - 36.9505T
Secondly, over the course of the year, the quotes of most mining companies have fallen almost 10 to 20-fold despite record production (while the Bitcoin exchange rate dropped by 4.4 times), and since they all invested aggressively in mining hardware to one degree or another, an impressive overhang has formed over Bitcoin, which continues to steadily bend it to the ground at undiminished difficulty. A similar overhang was formed over typical mining hardware, the prices of which also fell about 10-fold.
There is a paradox of large companies on the market, the offloading of which continues to put serious pressure on the BTC rate. In order to survive, they need to mine even more, use all the reserves of accumulated equipment and buy new ones. The capitulation of the mining titans, or the achievement of a somewhat stable balance in this segment, may become the very bottom of Bitcoin, heralding the coldest point of the crypto winter and the trend change towards the spring.
Here's what JPMorgan said about it earlier in 2022:
“Offloading of Bitcoins by miners, in order to meet ongoing costs or to delever, could continue into Q3 if their profitability fails to improve,” the strategists wrote. That offloading “has likely already weighed on prices in May and June, though there is a risk that this pressure could continue.” – JPMorgan strategists led by Nikolaos Panigirtzoglou.
Due to a critical decline in mining profitability, and simply because it is impossible otherwise, large miner producers continued to improve their technologies. 2022 was the year of prime miners, whose energy efficiency has reached unprecedented heights hitherto.
Canaan presented models Avalon Made A1346 (110T, 30 W/TH) and A1366 (130T, 25W/T)
MicroBT offered new models Whatsminer M50S with energy efficiency of 26 W/TH, hashrate of 126T and energy consumption of 3276W, as well as M50 (114T, 29W/T) and M53 with liquid cooling) 240T, 29W/TH.
Liquid cooling can be called the emerging trend of this year (and possibly the next), since Bitmain has released its Antminer S19 XP Hyd (255T, 5304W, 20.8W/T) and Antminer T19 Hydro (145T, 5438W, 37.5W/T)
The market impact of such effective mining hardware is a double-edged sword. On the one hand, the presence of such devices in large companies’ portfolios can ease the pressure on the Bitcoin exchange rate by reducing their operating costs. On the other hand, the terahash cost for these devices is significantly higher than for all others in terms of the incoming price, therefore, the already debt-overburdened corporations are unlikely to actively strive to purchase new products.
So, for devices with energy efficiency of 38W/T and up, the price of 1T will be more than $16, whereas for outdated models with energy efficiency up to 68W/T, it is less than $5. It is obvious that next year this segment will also strive for a price balance. If we imagine that such equipment becomes predominant with time, then the profitability point will be lower than today's value, which will also put pressure on the Bitcoin exchange rate. However, this is the outline of the next crypto winter, which is still very far away.
As for the current year, Bitmain held two landmark events of WDMS Global 2022 in Miami in July and in Cancun (Mexico) in November as part of its support for new miner models in 2022. Minto also took part in these conferences.
This year has been more than positive for Minto: the company is working steadily and continues to pay out daily rewards to BTCMT holders despite the fact that almost all known mining tokens have already ceased to exist. Minto has increased its mining capacity three times this year, bringing it up to 65P, and as a result of decisions made by the community, has improved energy efficiency to 57.2W/T.
The Minto team looks to the future with optimism, because it does not experience the typical difficulties for large mining companies, and the BTCMT token rate has decreased by less than 2 times in a year compared to their stock quotes.
The creation of a highly efficient high-quality mining infrastructure is the main goal of Minto, following which the company is able not only to survive any crypto winter, but also under more favorable circumstances to show an impressive result!
Stay with Minto and good luck to all of us in the coming 2023!