According to the founder of a Bitcoin mining business, profitable bitcoin mining is primarily the result of an effective and highly skilled team of experts who can maintain runtime. Therefore, a bitcoin miner with these qualities can still make money even when the price is roughly $20,000.
The “Bitcoin Fundamentals” hardly ever alter
One of the factors that is thought to have contributed to the collapse and insolvency of large crypto entities like 3AC and more recently Voyager is the fall in the price of bitcoin, which went from just under $30,000 at the beginning of June to below $20,000 by the middle of the month. However, these two well-known organizations are by no means the only ones who have been negatively impacted.
Many market participants, including bitcoin miners, have also had to deal with the increased risk of going bankrupt in addition to lower prices. Many market participants were or still are over-leveraged, as the situation with 3AC has demonstrated. More bankruptcies might occur if prices experience another significant decline.
The long-term plans of other market participants, like BTC miner Permian Chain, are unlikely to be significantly impacted by a further decline in the price of the leading cryptocurrency. Mohamed El-Masri, the founder and CEO of the Canadian cryptocurrency mining company, claims that their motivation comes from the fundamental value of bitcoin. El-Masri further clarified via email to Bitcoin.com News that Permian Chain’s course cannot be changed by the short-term price volatility of the cryptocurrency asset or the associated media headlines.
Here are the remaining comments made by the CEO of Permian Chain in response to the email questions from Bitcoin.com News.
BCN, or Bitcoin.com News Some significant players in this market have already collapsed as a result of the ongoing downward trend in the prices of crypto assets. There is no denying that Bitcoin miners are also under pressure. Can you explain to our readers how miners are impacted by a bitcoin price of under $20,000?
Mohamed El-Masri (MM): Global macroeconomic factors that drove energy prices to record highs and put downward pressure on equity stocks and crypto markets are largely to blame for the over-leveraged situation some of the major bitcoin miners are currently in. Because of these flaws, and to some extent because of the carelessness of heavily leveraged market participants who were forced to sell some or all of their bitcoin and other digital assets to pay off debt, the significant sell-off on cryptocurrency exchanges was widely sparked.
Bitcoin miners will not receive the exceptional returns they do at prices above $45,000 at prices under $20,000. However, the majority of commercial bitcoin miners use modern, highly effective ASIC equipment, which allows them to continue operating profitably as long as their power costs stay between $0.05 and $0.10 per kWh. Smaller miners who lack economies of scale and access to inexpensive energy sources are undoubtedly mining below their break-even point. However, an effective and highly skilled team of experts that can maintain runtime, even during a $20,000 bitcoin market, is largely the cause of profitable bitcoin mining.
One of the most important aspects of bitcoin is its Difficulty Adjustment Algorithm, which rewards miners for continuing to operate their equipment during periods of low market activity while other miners shut down their operations due to lack of profitability, defaults, insolvency, or other reasons. Maintaining the highest hashrate online for the longest amount of time is essential for gaining and reaping the benefits of the upside.
BCN: How have the low cryptocurrency prices affected Permian Chain’s business operations?
Permian Chain will keep mining bitcoin regardless of market prices, according to MM. Fundamentals hardly ever change, but headlines and market conditions do. We are in the business because of the inherent value of bitcoin.
Regarding our mining locations, we have developed a streamlined working relationship with our energy provider(s) by putting into practice our energy-as-a-service and bitcoin mining platform. For instance, Permian Chain closely collaborates with Brox Equity, our energy producer and site manager in Alberta, to streamline a vertically-integrated value chain; this allows us to continue mining and maintaining operations through on-site fieldwork and online software solutions.
BCN: Would mining in the Permian Chain still be financially viable if prices dropped even further?
Everything depends on what you consider to be profitable, says MM. Most likely not, if we’re discussing a monetary value to gauge profitability. However, if we consider bitcoin’s profitability, the answer is indeed. The fundamental value, in my opinion, does not correspond to the current market price of bitcoin. It takes time for the general public to understand the fundamentals.
I think bitcoin mining is a strong value creator if you have a ten-year outlook for your bitcoin investment. It is also crucial to understand that many miners will start to shut down globally if the price of bitcoin continues to fall. If enough miners cease operations, the difficulty adjustment will be under pressure to decrease. The difficulty of mining decreases as the difficulty rate does. As a result, a miner is more likely to earn bitcoin as a result of this than when the difficulty rate is high.
The difficulty rate gauges how difficult it would be for an ASIC mining device to validate blockchain transactions (solving blocks of transactions in exchange for bitcoins as rewards). Miners can earn more bitcoin in the same amount of time for the same cost of energy with lower difficulty rates because they can find and solve blocks more quickly. This results in higher profits.
BCN: For its data-mining facilities, Permian Chain uses what you refer to as low-cost energy, which comes from flared and stranded energy resources. Can you explain the rationale behind Permian Chain’s selection of this energy source?
Permian Chain is an energy-as-a-service platform that began with bitcoin mining for compute infrastructure. Through our tokenization processes and Smart Off-Take Agreement, we bring all energy sources together on the platform to assist the world’s energy producers in making money and profiting from their stranded and wasted resources (SOTA). We concentrate on bringing bitcoin mining off-grid, and it just so happened that we began with natural gas as our first source of renewable energy because that is where the ESG challenges are most critical to address, making our solution a very obvious use case.
BCN: Where in the world can one use flared and stranded energy resources to mine bitcoins for a profit?
MM: It depends on a number of variables because every jurisdiction has different standards for laws, labor costs, raw material costs, overhead costs, etc. Which all have an impact on your net power cost. There is a lot of talk about low-cost power in some places, but I can assume that the majority of these alleged “opportunities” do not take into account the other costs I mentioned. You must take into account all of those costs in order to provide you with an accurate picture of your operational costs. With that said, I think any price between $0.05 and $0.10/kWh should be regarded as low-cost and demonstrates efficient overall cost management. Aside from being off the grid, we.
BCN: According to some environmental organizations, bitcoin’s environmental impact will likely be eliminated with a change in its coding. Do you concur with this claim?
MM: Coding change? from what to what, change? In my opinion, Bitcoin won’t or shouldn’t change. Through Layer 2 technologies and improved next-generation hardware, it will only increase in adoption rate and boost its efficiency. New generation chips are still being produced by firms like Intel and Samsung to increase mining productivity.
Regarding the environmental impact, Bitcoin will continue to require mining “data center” facilities, just as the internet relies on facilities using 2% of the world’s on-grid power. Despite being the biggest computer in the world, Bitcoin only uses 0.4 percent of the world’s electricity. Most people use clean, renewable energy sources. A trend in bitcoin mining is the use of off-grid energy sources like clean hydro, solar, and, most likely, responsibly produced natural gas in the near future.
BCN: Can you briefly describe the operation of your tokenization platform?
Energy companies sign up for access to our platform along with their resources. Prior to approval, the submissions are reviewed. Once approved, the resource projects can be tokenized in one of two ways: (1) through a security token offering to accredited investors through broker-dealers registered on our platform; or (2) by issuing Smart Off-Take Agreements (SOTAs), which allow our network of mining partners to stake their stablecoin on energy projects that they are interested in using their ASIC miners on and joining our mining pool aggregator. By using on-site off-grid power for bitcoin mining, this second procedure enables energy companies to receive early support from miners and to commercialize their energy resources.
BCN: Despite the apparent abundance of solar energy, only a small portion of bitcoin mining is still done in Africa and the MENA region. What might be the causes of this, and what steps, in your opinion, should be taken to draw miners to these two regions?
MM: Innovation and new business models are simpler to comprehend and put into practice in nations and regions like North America where energy is predominately private. Energy resources are nationalized in the MENA region. Governments and regulators take longer to pursue innovation than do free markets. I think we can anticipate an influx of miners and foreign investments from all over the world once the MENA governments publicly announce regulatory frameworks specifically for bitcoin mining. Regulators and governments can keep a clear understanding of projects, take advantage of inexpensive reconciliation, and promote increased transparency thanks to PermianChain.
