Hello again! Welcome to Distributed Ledger, our weekly crypto newsletter. This will be the last installment of 2021, as the New Year is less than two days away. I’m Frances Yue, crypto reporter at MarketWatch. Today I’ll walk you through how the past year has been for bitcoin miners, and what they expect for 2022. Find me on Twitter at @FrancesYue_ to send feedback or chat about crypto.
Crypto in a snap
Major cryptocurrencies have deepened loss during the past week. Bitcoin BTCUSD, +0.33% traded 5.8% lower from seven days ago at around $47,687. Ether ETHUSD, +0.15% posted a 8.9% loss during the past seven days, recently trading at around $3,747. Meme token Dogecoin DOGEUSD, -0.58% declined 4.3% over the past seven sessions. Another dog-themed token Shiba Inu SHIBUSD, 0.35 was down 9.9% from seven days ago.
% 7-day return
Source: CoinMarketCap.com as of Dec. 30
% 7-day return
Source: CoinMarketCap.com as of Dec.30
Growth and challenges
In 2021, the crypto mining industry went from “a fringe movement, mostly full of hobbyists to a now very professionalized and institutional industry,” Charlie Schumacher, director of corporate communications at Nasdaq-listed bitcoin mining company Marathon Digital Holdings MARA, -4.45% told Distributed Ledger in an interview.
“If you look back at what bitcoin mining looked like a year ago, there were only a handful of companies that were publicly traded involved in the space,” Schumacher said. “And if you look at everyone’s market cap at that time, they’re far below what they are today.” Marathon Digital’s market capitalization rose to more than $3.5 billion from roughly $856 million at the start of the year.
However, the past year has also posted great challenges for some miners. Chicago-headquartered bitcoin miner Blockware Mining, for example, has seen delays in delivery of some equipment due to global supply chain disruptions during the pandemic. “Issues with shipping coming out of Malaysia and other places in the Far East have been extremely difficult,” Michael Stolzner, CEO of Blockware Mining, said in an interview.
“Also with building out the mining facility, we’ve had to deal with supply chain issues, from switchgear to transformers to other things,” Stolzner said.
The industry was also plagued by the China ban. After China started cracking down on crypto mining in May, Bitcoin’s hashrate, which measures the total computational power contributed to the blockchain network, fell more than 50% to about 85 EH/s on a seven-day average basis in July, according to data from Blockchain.com. A lower hashrate means the Bitcoin network is less secure and more vulnerable to attacks.
Bitcoin’s hashrate has fully recovered since then, reaching a record high of 182 EH/s in early December, as some Chinese miners migrated to other places such as the United States, Canada, and Kazakhstan, while other miners expanded their capacity.
Some industry participants said that China’s crackdown benefited some North American miners. As Chinese miners went offline in May and June, “the mining difficulty went down drastically. So the rewards of being a miner and being online were multiplied,” according to Blockware’s Stolzner.
Whit Gibbs, CEO of Compass Mining, a crypto mining marketplace, said that after the China ban, the company saw “a tremendous spike” in the amount of interest for people who want it to mine Bitcoin at data centers in the United States. “It was about a 300% month-over-month growth for Compass between June and July. So pretty significant,” Gibbs said.
As the industry sees increasing institutional participation, Marathon Digital’s Schumacher anticipates bitcoin’s hashrate will double by the end of 2022.
“That obviously means the Bitcoin network is more secure, but then for us, it also means that it’s a more competitive environment,” Schumacher said.
Compass Mining’s Gibbs expects bitcoin mining, which has long been criticized for its high energy-costs, will be increasingly environmentally friendly in 2022.
In 2022, a higher percentage of bitcoin mining will be powered by renewable energies, according to Gibbs. “Because you know, renewable power is plentiful and cheap. And those are the two most important criteria when a bitcoin miner is looking at a power source.”
Crypto companies, funds
In crypto-related company trading, shares of Coinbase Global Inc. COIN, -1.72% traded up 2.1% to $258 early afternoon on Thursday. It lost 3.8% for the past five trading sessions. Michael Saylor’s MicroStrategy Inc. MSTR, -3.17% traded 2.9% higher on Thursday to $572.24, and was 4.2% lower over the past five days.
Mining company Riot Blockchain Inc. RIOT, -4.98% shares gained 3% to $23.65, while it recorded a 8% loss over the past five days. Shares of Marathon Digital Holdings Inc. traded up 1.5% to $34, while it was down 9.7% over the past five days. Another miner Ebang International Holdings Inc. EBON, +5.09% advanced 3% to $0.98, with a 18% loss over the past five days.
Overstock.com Inc. OSTK, -2.69% traded up 3.2% to $61.66. The shares went down 1.9% over the five-session period.
PayPal Holdings Inc. PYPL, -1.72% traded 1.7% higher to $193.38, while it recorded a 0.7% gain over the five-session stretch. NVIDIA Corp. NVDA, -0.59% inched up 0.6% to $301.75, and was looking at a 1.8% advance over the past five days.
Advanced Micro Devices Inc. AMD, -0.86% inched down 0.3% to $147.9 while it logged a 1.2% gain over the past five trading days, as of Thursday afternoon.
In the fund space, ProShares Bitcoin Strategy ETF BITO, -3.05% was 0.6% higher to $30.05 Thursday, while Valkyrie Bitcoin Strategy ETF BTF, -2.93% was up 0.5% to $18.57. VanEck Bitcoin Strategy ETF XBTF, +2.43% inched up 0.1% to $46.87.
Grayscale Bitcoin Trust GBTC, -3.22% was trading at $35.74, up 1% Thursday morning.
Iran Orders Crypto-Mining Ban to Save Power During Winter Crunch (Bloomberg)
ProShares Plans New Metaverse ETF as Demand for Funds Surges (Bloomberg)
How Puerto Rico became a tax haven for high-flying crypto millionaires (New York Post)
Why Portfolio Managers Will Need to Look at Altcoins in 2022 (CoinDesk)