Profitable bitcoin mining is essentially the result of a team of experts with efficient and advanced technology that can maintain runtime, the founder of a bitcoin mining company claims. Thus, even when prices hover around $20,000, bitcoin miners with these attributes can operate profitably.
Bitcoin’s fundamentals rarely change”
The decline in Bitcoin’s value from just under $30,000 at the beginning of June to under $20,000 by mid-month, with large crypto entities like 3AC and more recently Voyager It is believed to be one of the factors that contributed to the collapse and insolvency of these entities. However, these two well-known entities were by no means the only ones severely affected.
In addition to having to deal with falling prices, many market participants, including bitcoin miners, have had to contend with the increased risk of insolvency.As the 3AC situation shows, many market participants had, or still have, excessive leverage still have it. And, if prices were to fall significantly, insolvency could increase further.
But for other market participants likeBTC Minor Permian Chaina further decline in the price of the top crypto is unlikely to have a significant impact on the company’s long-term plans. According to Mohamed El-Masri, founder and CEO of the Canada-based cryptocurrency mining company, the fundamental value behind bitcoin motivates them El-Masri also believes that short-term price fluctuations in crypto assets and the resulting media headlines alone will not be enough to get the Permian Chain back on track, he explained in an email to Bitcoin.com News.
Here are the rest of Permian Chain CEO’s responses to questions Bitcoin. com News sent him via email.
Bitcoin. com News (BCN). The continued downward trend in crypto asset prices has already led to the collapse of several major players in this space. There is no doubt that bitcoin miners are also facing the heat; can you explain to our readers how a bitcoin price below $20,000 would affect the miners?
Mohamed El Masri (MM). The over-leveraged situation faced by some major bitcoin miners is the result of global macroeconomic factors that have widely driven energy prices through the roof and put downward pressure on equity stocks and crypto markets. The massive sell-off on crypto exchanges was widely caused as a result of the vulnerability, and to some extent negligence, of overleveraged market participants who were forced to liquidate some or all of their bitcoin and other digital assets to cover debt payments.
At bitcoin prices below $20,000, bitcoin miners will undoubtedly not experience the superior returns that they experience at $45,000 and above. However, most industrial bitcoin miners are running a new generation of high-efficiency ASIC equipment and can still be profitable if they can keep their power costs within $0.05/kWh to $0.10/kWh. Smaller miners without economies of scale and low-cost energy sources are certainly mining below the break-even point. However, profitable bitcoin mining is widely practiced as a result of teams of professionals with efficient and advanced technology that can sustain runtime, even during the $20,000 bitcoin market.
Let’s not forget one of Bitcoin’s key features: its difficulty-adjustment algorithm. It rewards miners who stay online during low market cycles because other miners turn off their equipment due to lack of profitability, default, insolvency or whatever. The key to profiting from the upswing is to stay online at the highest hash rate for as long as possible.
BCN: How has the drop in crypto prices affected Permian Chain’s operations?
MM:Permian Chain will continue to mine bitcoin regardless of market prices. Headlines and market conditions change, but the fundamentals really change very little. The fundamental value behind bitcoin is why we are in this business.
As for mining sites, we have streamlined our relationships and established initiatives with energy provider(s) by implementing our energy-as-a-service and bitcoin mining platform. For example, Permian Chain works closely with Brox Equity, an Alberta energy producer and site manager, to streamline a vertically integrated value chain. From on-site field work to online software solutions, they are able to maintain mining and operations.
BCN: If prices were to drop further, would it still be profitable for Permian Chain to continue mining?
MM:It all depends on what you view as profitable. If you are talking about an amount to assess profitability, then probably not. But if you are looking at profitability in bitcoin, then yes. In my personal opinion, the value of the fundamentals and the market price of bitcoin do not match. Fundamentals take time to become apparent to the masses.
If you are looking at bitcoin investing for the next 10 years, I think bitcoin mining is a powerful value creator. It is also important to recognize that if the bitcoin price continues to fall, it is very likely that many mining companies will begin to shut down globally. If many miners shut down, there will be downward pressure on the difficulty adjustment. As the difficulty adjustment goes down, the difficulty of mining will decrease. As a result, miners will have a higher probability of winning bitcoins than when the difficulty rate is higher.
The difficulty rate measures how hard an ASIC mining machine must work to validate a transaction on the blockchain (resolve a block of transactions in exchange for bitcoins as a reward). A lower difficulty rate allows miners to find and resolve blocks faster, thus earning more bitcoins in the same timeframe for the same energy cost and therefore more profit.
BCN: Permian Chain uses what is called low-cost energy, which comes from flared or stranded energy resources in data mining centers. Explain why Permian Chain chose this energy source.
MM:Permian Chain is an energy-as-a-service platform for compute infrastructure, starting with bitcoin mining. We aggregate all energy sources on our platform and through our tokenization process and Smart Off-Take Agreement (SOTA), we help the world’s energy producers monetize and capitalize on resources that are being wasted. We are focused on taking Bitcoin mining off-grid. It just so happens that we started with natural gas as our first renewable energy source because that is where the challenges to solve from an ESG perspective are most important and our solution is a very obvious use case.
BCN: In which geographic locations is it possible to profitably mine bitcoin using flares and stranded energy resources?
MM:It depends on several factors, as each jurisdiction has different criteria such as regulations, labor costs, raw material costs, and overhead. However, it is easy to assume that most of these so-called “opportunities” do not take into account other costs such as those I mentioned. To actually get a clear picture of operating costs, all of these costs must be taken into account. Nevertheless, anything between $0.05 and $0.10 per kWh should be considered low cost and indicative of effective overall cost management. We also take into account the fact that we are off-grid.
BCN: Some environmental groups argue that changing the coding of bitcoin would likely eliminate its environmental impact. Do you agree with this argument?
MM: Coding changes. Change from what to what. I do not believe that bitcoin should or will change. It will only continue to grow in penetration and efficiency through layer 2 technology and a new generation of improved devices. Companies like Intel and Samsung continue to produce a new generation of chips that improve the efficiency of mining.
As for environmental impacts, bitcoin will continue to require mining “data center” facilities, just as the Internet operates in data center facilities that consume 2% of the world’s electricity supply. However, Bitcoin is the world’s largest computer, consuming only about 0.4% of the world’s electricity. The vast majority comes from renewable, clean energy. The trend in bitcoin mining is also leaning toward off-grid energy sources such as clean hydro, solar, and in the near future, responsibly produced natural gas.
BCN: Could you briefly describe how your tokenization platform works?
MM: Energy companies register themselves and their resources on our platform. We review their submissions prior to approval.(2) Issuance of a Smart Offtake Agreement (SOTA), allowing a network of mining partners participating in the Mining Pool Aggregator to bet stablecoins on energy projects interested in deploying ASIC miners. This second process allows energy companies to commercialize their energy resources by receiving early support from miners and deploying on-site off-grid power sources for bitcoin mining.
BCN: Africa and the Middle East and North Africa regions, which seem to be rich in solar energy, still account for only an insignificant percentage of bitcoin mining. What are the reasons for this? Also, what do you think needs to be done to attract more miners to these two regions?
MM:Countries and regions like North America, where energy is more privately owned, can easily and quickly understand and implement innovations and new business models. The Middle East and North Africa region has nationalized energy resources. It takes time for governments and regulators to pursue innovation at the same rate as the free market, and if MENA governments openly announce a regulatory framework specifically for bitcoin mining, we can expect an influx of miners and foreign investment from around the world. PermianChain will allow regulators and governments to maintain a clear understanding of the project, enjoy a low-cost settlement, and increase transparency.
Image Credits: Shutterstock, Pixabay, Wiki Commons