Study finds publicly listed mining companies posted losses amid crypto winter

The vast majority of publicly listed mining companies reported unallocated losses on their balance sheets, despite a buoyant 2021. Arcane Research analysts found this.

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— Arcane Research (@ArcaneResearch) September 27, 2022

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They examined the financial statements of Argo Blockchain, Bitfarms, CleanSpark, Stronghold, Hut 8 Mining, Marathon Digital Holdings, Riot Blockchain, and Core Scientific.

They found that only the first had unallocated profit of $26 million, while the others on the list carried unallocated losses ranging from $137 million to $1.3 billion.

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An undistributed loss of $1.3 billion at Core Scientific stems from a negative write-down of goodwill from the acquisition of BlockCap in July 2021, amounting to $788 million. The identifiable net assets of the latter at the time of the deal stood at $142 million, while the purchase price was $1.2 billion.

In other words, the majority on the list had been losing money for years. Experts attributed the situation to high administrative costs, unsuccessful bets on the first cryptocurrency and over-expansion during the 2021 bull market.

The companies failed to capitalise on favourable conditions last year, when the mining margin for Bitcoin peaked at 1,260%. It has since fallen to 85%, but it must cover operating costs, including depreciation of equipment and salaries.

\”This should serve as a warning that costs at some of these companies could get out of control. Adopting proper risk-management strategies and cutting administrative expenses should be given priority,\” the experts said.

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Earlier, in September, the mining company and cloud-mining infrastructure provider Compute North filed for bankruptcy.

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In April, Arcane Research analysts noted that the fall in Bitcoin price and the rise in hashrate will put pressure on the profitability of mining cryptocurrencies.

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In June, experts stated that mining profitability had fallen to 2020 levels.

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Some companies were forced to cut Bitcoin reserves. In July the trend continued. The heatwave in Texas exacerbated the situation, driving peak electricity demand and price spikes, forcing companies to temporarily halt operations.

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In September, Arcane Research concluded that, despite unfavourable market conditions, publicly listed companies in the industry remain financially resilient.

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