Bitcoin’s public mining companies are struggling along with the rest of the crypto market. As the Bitcoin price fell, these companies had seen their cash flow decline, pushing them to the brink of bankruptcy. However, while it seemed like the losses public BTC miners suffered happened during the bear market run, it even goes back to the father.
Bitcoin miners are hardly profitable
Both large and small public bitcoin miners had grown in popularity over the past year. Their shares allowed investors to bet in the crypto market without having to buy digital assets themselves. Thus, these public miners had generated millions of dollars in revenue. The problem arises from the ability of these companies to actually retain their profits throughout their lifetime.
Retained earnings is how a company shows its total accumulated net income over its lifetime, and when you look at the financial statements of these public miners, they’re far from encouraging. They show that most public bitcoin miners have not been able to keep any of their net earnings since their inception.
An obvious problem with these miners was how much of their earnings go towards administrative costs. This report shows that Bitcoin miners spend an average of 50% of their revenue on administrative costs compared to their gold and oil & gas counterparts.
Public miners see deficit | Source: Arcane Research
Additionally, these companies had committed to large-scale expansion plans during the bull market that have become more difficult in the bear market. This has caused a sharp drop in retained earnings for most public miners.
Are mining companies profitable?
Over time, there are some public bitcoin miners who have managed to swim against the tide and keep their retained earnings in the green even during these trying times. One of them is the mining company Argo Blockchain. A report by Arcane Research lists Argo Blockchain as the only public BTC miner with positive retained earnings of $26 million. The rest of the report paints a bleak picture of the Bitcoin mining industry.
Most companies have had significant deficits of varying degrees throughout their lifetime. Core Scientific reported the largest deficit at $1.304 billion. Next in line is Riot Blockchain, which had recorded a significant deficit of $569 million over its lifetime.
BTC holds above $19,000 | Source: BTCUSD on TradingView.com
Others on the list were Marathon Digital, Hut 8, and Stronghold with deficits of $357 million, $221 million, and $156 million, respectively. Two others, CleanSpark and Bitframs, came out with deficits of $154 million and $137 million.
This shows that these companies are spending more money than they are taking in during this time. Figures show that even during the bull market when cash flow for BTC mining machines was high, most of these companies continued to lose money. Therefore, investing in the stocks of these companies should be approached with caution and proper risk management.
Featured image from Blockchain News, charts from Arcane Research and TradingView.com
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