Following the Bitcoin crash that has recently driven trading platforms and hedge funds especially into insolvency, crypto mining companies are also facing a tight situation. Revenues for these firms, which charge units of cryptocurrencies using energy-intensive hardware, have plunged by as much as 80 percent, according to a report by analytics firm Arcane.
Shares of Riot Blockchain are down nearly 75 percent since the start of the year, while Marathon Digital is down as much as 80 percent. Skyrocketing energy costs are especially affecting these companies, with electricity costs accounting for more than 80 percent of expenses.
In addition, according to Arcane surveys, operating cash flow at nearly all of the mining companies is insufficient to pay for outstanding hardware shipments.
Indeed, Arcane believes that Marathon – which has been one of the fastest-growing crypto mining companies of late – would be forced to liquidate large portions of its existing bitcoin reserverven.
Prices of Bitcoin, Ethereum and other altcoins had collapsed sharply in May 2022. Since a recovery has so far failed to materialize, by now many experts are talking about a crypto winter – i.e. a prolonged period of economic downturn in the entire cryptocurrency market.
Bankruptcies and layoffs across the industry
Several bankruptcies of major crypto brokers shook the market in July alone. Voyager Digital filed for bankruptcy on July 6, 2022. Three Arrows Capital officially announced its bankruptcy two days earlier, after long speculation of bankruptcy. As a result of cryptocurrency prices that have been at low levels for weeks, a number of hedge funds have run into financial difficulties.
The Vienna-based Bitpanda has fired a quarter of its entire workforce at the end of June 2022. Similarly, Coinbase, one of the largest platforms for trading cryptocurrencies, is in a bad situation.
Having only gone public in the summer of 2021, the company is now traded at a price that is more than 70 percent lower than when it went public. CEO Brian Armstrong said in June 2022 that he would be laying off hundreds of employees.