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Bitcoin public mining companies are struggling along with the rest of the crypto market. With the fall in the price of bitcoin, these companies had seen their cash flow plummet, pushing them to the brink of bankruptcy. While it may have seemed that the losses incurred by public BTC miners occurred in the bear market, it actually goes back to father.
Bitcoin Miners Are Barely Profitable
Public bitcoin miners, both large and small, had grown in popularity over the past year. Their shares allowed investors to bet on the crypto market without having to buy digital assets themselves. So these public miners had seen millions of dollars in revenue. The problem stems from the ability of these companies to maintain their earnings throughout their lives.
Retained earnings are how a company shows its total accumulated net income over its lifetime and looking at the financial statements of these public miners, they are less than encouraging. They show that most public bitcoin miners have not been able to keep any of their net income since their inception.
An obvious problem with these miners was how much of their revenue goes toward administrative costs. This one report shows that compared to their gold and oil & gas counterparts, bitcoin mines used on average 50% of their revenues for administrative costs.
Public miners see in deficit | Source: Arcane Research
In addition, these companies had committed to extensive expansion plans during the bull market that is more difficult to realize in the bear market. This has translated into a sharp drop in the retained earnings of most public miners.
Are mining companies profitable?
Over time, there have been some public bitcoin miners who have been able to go against the grain and have their retained earnings in the green even in these trying times. One of these is the mining company Argo Blockchain. In a report by Arcane Research, Argo Blockchain is listed as the only public BTC miner with positive retained earnings of $26 million. The rest of the report paints a grim picture of the bitcoin mining industry.
Most companies had significant shortfalls to varying degrees throughout their lives. The largest deficit was recorded by Core Scientific at $1.304 billion. Next in line is Riot Blockchain, which had seen a significant shortfall of $569 million in 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 a deficit of $154 million and $137 million.
What this shows is that these companies are spending more money than they are making in this day and age. The numbers show that even during the bull market, when cash flow for BTC mining machines was high, most of these companies continued to lose money. Investing in the shares of these companies should therefore be approached with caution and good risk management.
Featured image from Blockchain News, charts from Arcane Research and TradingView.com
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