As the price of cryptocurrencies continues to fall, miners face a liquidity crisis. Core Scientific, the largest publicly traded miner in the world, has stated that it may deplete its cash reserves before the end of the year.
Bitcoin's mining difficulty level was adjusted by 7.32 percent on Tuesday in Asia. This marked the steepest fall since July 2021. Many companies in the industry are facing a cash shortage due to rising energy costs and Bitcoin prices that have been pushed even lower owing to the rout of the FTX exchange last month.
The difficulty of mining bitcoins adjusts approximately every two weeks. Its fluctuation is directly correlated with shifts in the amount of computer power that must be used to mine bitcoin blocks and be rewarded with bitcoins.
The seven-day average hashrate of Bitcoin, which is a measure of the computational power that is employed, was approximately 251.1 exahashes per second on Monday, according to statistics provided by Blockchain.com (1). This represented a decrease from the seven-day average of 261.3 exahashes on November 21.
The Most Difficult Times For Bitcoin Miners
The mining difficulty reading hit an all-time high on November 21, and according to data from BTC.com (2), it has now settled down to its current level of 34.24 trillion as of block height 766,080 in the bimonthly adjustment that took place on Tuesday.
According to data provided by CoinMarketCap (3), the price of bitcoin touched an all-time high of more than US$67,000 in November 2021, but it has since dropped by over 75% to trade at approximately US$17,000 on Tuesday in Asia.
In an interview, Adrian Wang, chief executive officer of Metalpha, a digital asset wealth management corporation with headquarters in Hong Kong, stated that enterprises engaged in mining Bitcoin demand significant capital expenditures and "plenty of investments."
According to Wang, "[at] the price top of the previous year, a lot of people extended and took debt based on the premise that the Bitcoin price [was] over US$60,000. Right now, it's somewhere around $16,000 USD. The presumptions are extremely dissimilar."
After issuing a warning in October regarding the possibility of the company filing for bankruptcy, Core Scientific stated in its report for the third quarter that the company's "existing cash resources will be expended by the end of 2022 or sooner."
This year, the mining company listed on the Nasdaq has reported that its net loss has reached US$1.7 billion through the end of September, which compares to a loss of US$13,194 during the same period in the previous year.
In September, Compute North, based in the United States, filed (4) for bankruptcy under Chapter 11 and is currently trying to sell its mining sites. Foundry Digital LLC, a company specializing in crypto mining and staking, said a month ago that it intends to purchase two turnkey mining operations from Compute North.
Miner Argo Blockchain Plc, listed on the London Stock Exchange, along with Bitcoin miners Iris Energy Ltd. & Greenidge Generation Holdings Inc., who are traded on the Nasdaq, have all stated that they are experiencing liquidity constraints.