Home » Opinion: European crypto miners’ woes are North American miners’ gains

Opinion: European crypto miners’ woes are North American miners’ gains

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Employees at the data center of BitRiver, a company that provides cryptocurrency mining services, in Bratsk, Russia, March 2, 2021.Maxim Shemetov/Reuters

The Bible says that rain falls on the just and the unjust alike. James Joyce says snow will fall across the country.

high energy costs. Ukraine influencing the war Cryptocurrency Most of them are miners who deal with Bitcoin. That’s all we know. However, the impact is uneven.

European miners will be hit the hardest, through which it will ultimately be miners elsewhere that will benefit, due to the peculiarities of the crypto.

It may still be time to consider stocks of listed cryptocurrency miners.

Russia’s invasion of Ukraine has resulted in harsh Western sanctions against the aggressors. In retaliation, Russia, a major natural gas exporter, has restricted the amount of goods it ships to Europe.

Gas prices are soaring. This is impacting other types of energy as consumers try to find alternatives to expensive gas. This also impacts electricity prices, as much of that electricity is generated from gas.

Energy is somewhat fungible, and an impact on one type of it can affect all types.

And this is how cryptocurrency miners are affected. Because energy is their true game.They have little control over the prices of the goods they produce. Or the efficiency of their machines. Cryptocurrency mining requires a huge amount of energy, and the cost of electricity determines the success or failure of mining operations.

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Its prices have risen significantly in the wake of Ukraine’s invasion, leaving many miners in a tough spot as they have to deal with rising production costs in the midst of a bear market.

But now things are even tougher.

The European Commission recently announced that European Union member states should be prepared to halt all cryptocurrency mining “in case load shedding becomes necessary on the electricity system”.

For European miners, it’s scary. However, if mining mechanics force them to close down, the miners that continue to operate will ultimately benefit more.

This is because the reward for mining is fixed. About every 10 minutes, his 6.25 bitcoins worth about US$130,000 are released to the network. Every miner shares her 6.25 Bitcoins.

When China announced it would ban mining in 2021 and the major Chinese miners shut down, we witnessed before the phenomenon of miners making profits when their competitors left. As a result, the ‘difficulty’, which indicates how difficult it is to mine profitably, has decreased by 28%.

The impact can be seen in the stock prices of North American miners that were not forced to close.

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Nearly two months after China’s mining ban, the shares of Hut 8 Mining Corp., which is listed on the Toronto Stock Exchange, surged more than 160%. It was certainly a bull market for cryptocurrencies, but Bitcoin only rose about 50% over the same period.

Will we see a repeat of that this winter?

Hard to say. Cryptocurrencies are in a bear market, facing high central bank interest rates for the first time in a short period of time. And the fate of miners depends on the fate of their underlying commodity.

The situation in Europe is also uncertain. European gas prices are falling in Germany’s spectacular effort to fill its winter storage facilities. The West may resent continuing to support Ukraine at such a high cost. Russia may surrender in a wretched war. anything can happen

But on the flip side, many of these mining companies have sweet power deals that lock in prices for the long term. Much of North America has been largely unaffected by high gasoline prices.

Similarly, Bitcoin is already badly beaten. At the current price of around US$20,000, he has been down for more than two months, which was his last bull market peak of 2017.

Traditionally, in every market cycle, Bitcoin never crashes past the highs it set during the last bear market, and that’s where it is now.

For brave enough investors, there is always something to do.

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