Energy companies are emerging as a major force in the cryptocurrency space as operational risk is reduced and profit margins widened. Regulatory filings from TeraWulf, the cryptocurrency subsidiary of Beowulf Mining Plc, show that its mining capacity is expected to reach 800 megawatts by 2025, accounting for 10 percent of the Bitcoin network’s current computing power.
Zhitong Finance noted that the company is one of the few energy groups that found Bitcoin mining profitable from customers before building its own cryptocurrency mining facilities, the company in 2020 for Marathon Digital (MARA.US) ) saw the opportunity when building a data center.
“Energy companies tend to be very conservative by nature and are often regulated,” said Paul Prager, CEO of TeraWulf. “We are early adopters because we are on the front lines of our partnership with Marathon Digital.”
Gregory Beard, CEO of Stronghold, said that while miners can earn a handsome profit of 5 cents per kilowatt, miners with direct energy and power assets tend to enjoy lower prices. “If you buy energy from a producer and then pay a third-party operator to manage the data center, your profit margins will be lower than those of companies that own the energy themselves.”
These extra profits could give energy companies an edge over competitors as profit margins in the bitcoin mining industry continue to shrink. Bitcoin’s profit margin has fallen from 90% to around 70% as the price of bitcoin remains 40% below its November high and the Russian-Ukrainian conflict has pushed up energy prices, analysts said. Further pressure is expected as the Bitcoin block reward is also scheduled to be cut in half in less than three years.
“It’s not just an efficiency from a business perspective, it’s a risk that we’re better able to deal with the risk,” Prager said.
Typically, Bitcoin miners pay hosting sites to not only build their own data centers, but also host, operate and maintain their own mining machines. Fees for such services have also been on the rise since Asia’s ban on crypto mining gave U.S. miners a multibillion-dollar windfall, with many miners able to earn more bitcoin from the network with the same input .
In the US, early adopters of bitcoin mining technology such as Marathon Digital and Blockchain (RIOT.US) still dominate in terms of computing power. But another advantage that energy-company-turned bitcoin miners may enjoy over their peers is their willingness to sell the bitcoin they’ve mined, unlike some crypto enthusiasts who hold it all the time.
With the recent drop in bitcoin prices, companies like Marathon Digital have been improving their balance sheets and turning to debt and equity capital markets to raise funds. Meanwhile, CleanSpark executive chairman Matthew Schultz said the company had not sold a share since November.
“We’re not selling a portion of the company, but a fraction of the bitcoins we mine,” he said. “At current prices, it would cost about $4,500 to mine one bitcoin at our company’s own facility; that’s a 90% profit margin. I can sell bitcoin and use it to pay for my facility, operations, staff and growth , without diluting my equity.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/with-90-profit-margins-energy-companies-are-becoming-major-players-in-the-cryptocurrency-space/
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