Bitcoin’s “basic value is not in line with market price” – Crypto Miner – Interview Bitcoin News
Profitable bitcoin mining is mainly the result of an efficient and highly skilled team of professionals who can maintain driving time, a founder of a Bitcoin mining company has claimed. Therefore, even when the price fluctuates around $ 20,000, a bitcoin miner with these characteristics can still operate profitably.
“Bitcoin Fundamentals rarely change”
The fall in the value of bitcoin from just under $ 30,000 in early June to less than $ 20,000 in the middle of the month is believed to be one of the factors contributing to the collapse and insolvency of large cryptocurrencies such as 3AC and recently Voyager. However, these two high-profile units are by no means the only ones seriously affected.
In addition to having to deal with lower prices, many market participants, including bitcoin miners, have had to contend with the increased risk of becoming insolvent. As the situation with 3AC has shown, many market participants were or are over-leveraged. Another significant price drop could lead to more insolvencies.
However, for other market participants such as the BTC miner Permian Chain, it is unlikely that a further fall in the price of the top crypto will have a major impact on the company’s long-term plans. According to the founder and CEO of the Canada-based cryptocurrency mining company, Mohamed El-Masri, the fundamental value behind bitcoin is what motivates them. El-Masri also explained to Bitcoin.com News via email that the short-term price volatility of the cryptocurrency and the accompanying media headlines alone can not make Permian Chain change course.
Below are the rest of the Permian Chain boss’ answers to questions sent to him by Bitcoin.com News via email.
Bitcoin.com News (BCN): The continuing downward trend in cryptocurrency prices has already led to the collapse of some major players in this area. There is no doubt that Bitcoin miners are also facing the heat. Can you explain to our readers how a bitcoin price of less than $ 20,000 affects miners?
Mohamed El-Masri (MM): The over-leveraged situation faced by some of the major bitcoin miners is largely the result of global macroeconomic factors that have driven energy prices to the ceiling and put downward pressure on equities and crypto markets. The large sales on crypto exchanges were largely triggered as a result of the vulnerabilities, and to some extent, the negligence of over-leveraged market participants who were forced to liquidate some or all of their bitcoin and other digital assets to cover debt payments.
A bitcoin price below $ 20,000 will definitely not provide the outstanding return that bitcoin miners experience above $ 45,000. However, most industrial bitcoin miners run new generation and highly efficient ASIC equipment, where they can still remain profitable, provided they can maintain power costs within $ 0.05 / kWh and $ 0.10 / kWh. Smaller miners who do not have economies of scale and affordable energy sources are guaranteed to operate below the break-even point. However, profitable bitcoin mining is largely the result of an efficient and highly skilled team of professionals who can maintain runtime, even below a $ 20,000 bitcoin market.
We should not forget one of bitcoin’s key features, its difficulty adjustment algorithm, which rewards miners who stay online during low market cycles when other miners turn off their equipment due to lack of profitability, default, insolvency or whatever … The key to gain and the Benefit with the benefits is to be online with as much hashrate as possible for as long as possible.
BCN: What has been the impact of the squeezed cryptocurrencies on Permian Chains’ business?
MM: Permian Chain will continue to extract bitcoin, regardless of market prices. Headlines and market conditions change, but fundamentals rarely change. The basic value behind bitcoin is what we are in this industry for.
As for our mining sites, we have established a streamlined relationship with our energy suppliers by implementing our energy-as-a-service and bitcoin mining platform to streamline our efforts. For example, Permian Chain works closely with our Alberta energy producer and site manager, Brox Equity, to streamline a vertically integrated value chain; from on-site fieldwork to web-based software solutions, we are able to continue mining and maintain operations.
BCN: If prices were to fall further, would it still be profitable for Permian Chain to continue mining?
MM: It all depends on what you see as profitable. If we’re talking about a dollar value to assess profitability, then probably not. But if we look at profitability in the form of bitcoin, then yes. In my personal opinion, the fundamental value is not in line with bitcoin’s market price. Basics take time to become apparent to the masses.
If you have ten years of prospects for your bitcoin investment, then I think bitcoin mining is a strong value creator. It is also very important to realize that if the bitcoin price continues to fall, it is very likely that many miners will start shutting down globally. If enough miners close down the business, it will put downward pressure on the difficulty adjustment. As the degree of difficulty decreases, the process of mining becomes less difficult. As a result, this increases a miner’s chances of earning bitcoin more often than when the difficulty level is high.
The degree of difficulty measures how hard an ASIC miner must work to verify transactions on the blockchain (loose blocks of transactions in exchange for bitcoins as a reward). With lower levels of difficulty, miners can find and solve blocks faster, so they can earn more bitcoin in the same time frame for the same energy cost, hence more profit.
BCN: Permian Chain uses what you call low-cost energy derived from flared and stranded energy resources for its data mining centers. Can you explain why Permian Chain has chosen to use this energy source?
MM: Permian Chain is an energy-as-a-service platform for data infrastructure, starting with bitcoin mining. We gather all energy sources on the platform to help the world’s energy producers monetize and capitalize on their wasted and stranded resources through our tokenization processes and Smart Off-Take Agreement (SOTA). We focus on taking bitcoin mining off-grid, and it happened that we started with natural gas as our first natural energy source, because that is where the challenges are most important to solve from an ESG perspective, which makes our solution a very obvious use. case.
BCN: In what geographical locations is it possible to extract bitcoin profitably by using flared and stranded energy resources?
MM: It depends on several factors as each jurisdiction has its different standards from regulations, labor costs, raw material costs, fixed costs, etc .. All of this affects your net power cost. I hear a lot of talk about low cost power in certain areas, but I can easily assume that most of these so-called “options” do not take into account other costs that I mentioned. To actually give you a clear understanding of your operating costs, you need to include all of these costs. That said, I think anywhere between $ 0.05 and $ 0.10 / kWh should be considered low cost and show effective total cost management. Considering that we are also off-grid.
BCN: Some environmental groups have said that a change in the coding of bitcoin will most likely eliminate the environmental impact. Do you agree with this argument?
MM: Change in coding? Switching from what to what? I do not think Bitcoin should or would change … it will only continue to grow in usage rate and improve efficiency through Layer 2 technologies and improved new generation equipment. Companies such as Intel and Samsung continue to produce new generation chips that will improve mining efficiency.
In terms of the environmental impact, just as the Internet runs on data center facilities that consume 2% of the world’s grid power, Bitcoin will continue to require “data center” facilities for mining. However, Bitcoin is the largest computer in the world and uses only about 0.4% of the world’s electricity. Most are outside renewable and clean energy sources. The trend of bitcoin mining also leans towards off-grid energy sources such as clean hydropower, solar energy, and most likely in the short term, responsibly produced natural gas.
BCN: Can you briefly explain how your tokenization platform works?
MM: Energy companies register themselves and their resources on our platform. We review the submissions before approval. Once the resource projects have been approved, they can go through two tokenization routes; (1) by means of a security token offered to accredited investors by means of broker-dealers registered on our platform; and (2) by issuing Smart Off-Take Agreements (SOTAs) that allow our network of mining partners that join our mining pool aggregator to invest their stack coin on energy projects in which they are interested in placing their ASIC miners. This second process allows energy companies to receive early support from miners and commercialize their energy resources by distributing off-grid electricity for bitcoin mining.
BCN: Both Africa and the MENA region – where solar energy appears to be plentiful – still account for an insignificant share of bitcoin mining. What could be the reasons for this, or what do you think needs to be done to attract miners to these two regions?
MM: In countries and regions such as North America where energy is mainly private, innovation and new business models are easier and faster to understand and implement. The MENA region nationalizes energy resources. It takes longer for governments and regulators to drive innovation at the same pace as free markets. I believe that when the MENA governments openly announce regulatory frameworks around bitcoin mining specifically, we can expect to see an influx of miners and foreign investment from around the world. PermianChain enables regulators and authorities to maintain a clear understanding of projects, enjoy low-cost reconciliation and allow increased transparency.
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