It gets messy for crypto miners: Where are they going from here?

What happened

It has been another rocky week in the world of cryptocurrency mining.

Starting at. 12:30 ET today, shares off CleanSpark (CLSK 1.43%) and Cabin 8 Mining (COTTAGE 3.95%) has fallen 6% and 2.6% respectively from last Friday’s closing. These moves come in the middle of a series of macro headwinds that have spread over the past week.

Kazakhstan, still an important country in the world of Bitcoin (BTC -1.01%) mining, announced a new set of tax laws aimed at inhibiting domestic crypto-mining. Prices for Bitcoin mining rigs have also fallen to 2020 pandemic lows, amid a decline in global activity and fire sales linked to recent bankruptcy-related news. And most notably, Texas power grid operators have asked all Bitcoin miners to shut down operations to ease the burden on an already stretched power grid.

Interestingly enough, Riot Blockchain (RIOT 4.70%), which was previously negative on the week, has shot in the green on news the company will comply with requests to reduce energy consumption. Despite the fact that the company has significant operations in Texas, it seems that investors see the current rising Bitcoin price as a more promising catalyst in the medium term.

So what

It is undoubtedly a bearish environment for crypto miners right now. Whether it is environmental considerations, or simply stretched power grids in many regions that invited crypto mining, regulatory headwinds remain strong for this sector. This situation may remain in place for some time, especially given the extent to which geopolitical concerns have affected energy security in different regions.

That said, falling prices for mining rigs and a higher Bitcoin price bode well for miners with existing business looking to expand. Bitcoin mining can still be portable, if the price of mining equipment falls enough. And those crypto-miners who have the opportunity to increase production in other regions can still see higher profits in the short term.

What now

The most important deciding factor driving the profitability of crypto mining is the price of Bitcoin. Today’s rise for Bitcoin seems to overshadow a rather weak view in general for this sector. Whether or not investors are too easy to brush off regulatory concerns will be decided over time. However, this week’s price action in this sector has been exciting to watch, for sure.