The worst may just be over for bitcoin miners after solid January

If energy prices continue their downward spiral and the price of bitcoin (BTC-USD) doesn’t fall back into the mid-teens, then “I think it’s going to be pretty good” for bitcoin miners and “I suspect the worst is over” for them, Christopher Bendiksen, Bitcoin Head of research at CoinShares, Seeking Alpha told in a recent interview.

In fact, natural gas prices in recent months have erased much of last year’s exceptional gains fueled by Russia’s war in Ukraine, in part because of an unusually warm winter. That could again bode well for bitcoin (BTC-USD) miners because lower energy/electricity prices will increase their profitability, which largely depends on their ability to secure cheap electricity.

Another important source of profitability for miners is the price of bitcoin (BTC-USD), whose downward momentum over the past year has been unfavorable to the troubled industry. However, so far this year, the token has made notable gains and climbed around 30% starting Friday afternoon.

This dynamic appears to have been partially reflected in many of the nine listed bitcoin (BTC-USD) miners’ January statistics analyzed by Seeking Alpha. The average bitcoin mined rose by 18.3% from a month ago, while the average hash rate increased by 5.0%, as shown in the table below. Note that Hut 8 Mining (NASDAQ:HUT), Greenidge Generation Holdings (NASDAQ:GREE) and Sphere 3D (NASDAQ: ALL) have not yet published their January issues.

On a less positive note, the so-called bitcoin (BTC-USD) mining difficulty, a measure of how difficult it is to mine a new block for the blockchain, was at an all-time high of 39.35 trillion in February. 6 versus 34.09 trillion in the previous month, according to Blockchain.com data. While a higher difficulty level suggests that the network is more secure against attack, it also means that more computing power is required to mine the same number of BTC blocks, a move that hampers miners’ profitability. That said, the bitcoin network’s estimated hash rate, which measures how much computing power is used to process transactions on the blockchain, was 277.49 million terahasshes per second (TH/s), down slightly from the record of 295.09 million TH /p. January 29 and up from 270.91M Th/sa month ago.

However, there are some positive developments to look forward to, mainly the upcoming bitcoin (BTC-USD) halving event, where the reward for mining BTC transactions will be reduced by 50%. In theory, the number of new bitcoins entering circulation (token supply) decreases while the demand remains the same, and thus the price of bitcoin should rise. BTC halving happens every four years (or every 210,000 blocks) and the next one is estimated to take place sometime in 2024. “If it’s anything like previous cycles, then the ‘halving’ should have a positive narrative effect on bitcoin (BTC- USD ) demand,” Bendiksen pointed out.

“After the halving, we’ll probably have to go into $30,000, at least, for a lot of the miners to be comfortable,” he added, noting that miners have different cost bases. Bitcoin (BTC-USD) changed hands at $21.72K at the time of writing.

For bitcoin (BTC-USD) miners, “the name of the game is still going to be survival,” Bendiksen argued, as some miners such as Greenidge (GREE) and Stronghold Digital Mining (NASDAQ:SDIG) is in the middle of debt restructuring. Still, others like Core Scientific ( OTCPK:CORZQ ) filed for bankruptcy protection. “Going into the halving, I think it’s going to be about reducing hashish costs and making sure that obligations don’t fall due in the time after that.”

And in an effort to raise money, cover costs and improve margins, some miners continued to offload part of their bitcoin (BTC-USD) holdings. Riot Platforms (NASDAQ:RIOT), for example, said it sold 700 BTC during January to generate revenue of around $13.7 million.

“It obviously has an exacerbating effect on market declines and increases volatility,” he said. “It just makes everything worse.”

Seeking Alpha contributor Knox Ridley provided a multifaceted analysis of bitcoin (BTC-USD) that signals the potential for a major trend reversal.