Faced with poor profitability, Bitcoin miners are looking for new ways to stay afloat

Until six months ago, Bitcoin mining was a profitable exercise. It was because the price of BTC was much higher, which allowed miners to run their mining rigs at full capacity and earn handsome profits. However, much has changed since then. With BTC falling well below $20,000, miners are barely able to cover their costs, even with the best conditions, equipment and power prices.

Naturally, mining is no longer easy money and miners are looking for other ways to make money. In this article we will learn about some of the other sources of income that miners are exploring and how it works for both retail and large mining companies.

High performance computing

Bitcoin mining rigs are capable of performing tasks other than just mining. It’s the first thing big hosting companies are leveraging to survive this crypto winter. Applied Blockchain, one of the world’s largest hosting companies, recently renamed itself Applied Digital to signal the expansion of its scope beyond just mining.

While the renaming has yet to be ratified by stakeholders, steps are already in place to move towards high performance computing (HPC). It may be an ongoing crypto winter, but the world’s use of computing power and the internet is only increasing, so there is always sufficient demand.

The hardware that Applied Digital currently owns is being programmed for uses “related to image processing, graphics rendering, artificial intelligence and machine learning,” Applied Blockchain CEO Wes Cummins said during a recent earnings call.

Another major player in the mining space is Hut 8, whose CEO openly announced that they were going out to HPC to survive the winter. He said the move will include “potentially leveraging our GPUs to provide AI, machine learning or VFX rendering services to customers and mine the second most profitable proof-of-work digital resource during idle time.”

Buy out the competition or play against mining difficulties

It is survival of the fittest when the crypto winter weeds out weaker firms. Cash-rich miners are buying up smaller businesses on the brink of closure. For example, mining giant CleanSpark has been busy buying up competition in recent months. The company has already spent nearly $100 million to buy Georgia mining facilities from Mawson and Waha Technologies. It also bought 10,000 discounted Bitmain Antminer S19j Pro rigs.

This gives them access to more mining hardware and can increase their profitability manifold when the price of BTC increases and mining returns to its heyday. It’s a gamble, of course, but it can pay off big if everything goes according to plan.

Another way to beat falling profitability is to bet against it. That’s exactly what crypto services firm Luxor helps miners do. On October 10, the company launched a new product for investors to make money using bitcoin mining derivatives.

The product is called Luxor Hashprice NDF and works like all other derivative products used in traditional finance (TradFi). But instead of betting against the price of a stock or crypto to protect against market downturns, the Luxor Hashprice NDF will allow users to hedge against the bitcoin mining revenue that can be earned over a set period of time.

“If BTC mining profitability goes down over this time frame, then you’ve hedged that downside and profited,” said Colin Harper, head of research at Luxor. “But if profitability goes up, then you’ve lost money,” he went on to say while speaking to Decrypt.

What do the retail miners do?

Wondering what retail or individual miners can do now to mine another day? The obvious choices have been to get a day job, trade bitcoin and other cryptos, and pool their hardware equipment into high-performance computing pools.

Another trend that has caught on in recent times is to optimize where possible to spend less to mine more Bitcoin. Whether it’s identifying the times when network problems are lowest or finding renewable energy sources to power their hardware, retail bitcoin miners are doing everything they can to stay afloat.

Conclusion

Network difficulty is reaching new heights every two weeks, the price of new hardware is increasing with inflation, and the price of electricity is not what it once was. Despite all this, there is hope.

So what if the share prices of many publicly traded mining giants are half of what they were six months ago? If there’s one thing we know about crypto, it’s that prices go back up just as quickly as they fall. The pivots made by these mining companies are not permanent. Mining will be back as soon as it is profitable again.