How can we protect our profits against shrinking margin?

[ChillyMatthew]

GM bitcoin fam.

So, I was doing some research on how can I protect my earnings and came accross the information that in response to falling crypto prices and increasing energy expenses, publicly listed Bitcoin miners were forced to sell nearly all of the BTC that they've mined in 2022.

IMG from the original source: https://imgur.com/VSPSlfi

What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

Source:
https://tokenist.com/public-bitcoin-miners-forced-to-sell-99-mined-btc-in-2022-report/

[bitmover]

GM bitcoin fam.

So, I was doing some research on how can I protect my earnings and came accross the information that in response to falling crypto prices and increasing energy expenses, publicly listed Bitcoin miners were forced to sell nearly all of the BTC that they've mined in 2022.

IMG from the original source: https://imgur.com/VSPSlfi
What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

quoting so everyone can see.



Miners sells because they need to pay for their energy. This always happens, as their cost is too high

You can expose some money to fiat which has less volatility if you are affraid.

[The Cryptovator]

If miners are concerned about volatility, they should secure some funds to purchase energy. They don't get less fees when Bitcoin is pumped; rather, the network becomes congested, and they charge more. They should consider how they will manage their energy bills in the future. They should have a business policy because they are here to make money, not lose it. So they must either invest in fiat to buy energy or secure funds in fiat during a bull market. As a result, they can easily survive a bear market.

[odolvlobo]

What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

Bitcoin miners can use futures just like any other commodity producer. That protects them against short term fluctuations, but if they cannot mine profitably in the long run, they cannot stay solvent.

[pooya87]

I don't think the situation with some miners has anything to do with profit and its shrinking margins.

During financial crisis many companies strain to keep their business alive, so they have to dig into their reserves and do whatever they can to make get their hands on some money. The bitcoin miners you mentioned are not all miners, these are a handful of very specific mining companies that were facing the energy crisis and had to sell their bitcoins to cover their costs. For example Core Scientific is a company that filed bankruptcy recently so obviously they liquidated what they stored not because of profit, etc. but because of their terrible financial situation due to bad business model and lack of foresight.

Some others like Iris Energy had built their big mining operation with loans, but the lenders don't care about the financial and energy crisis, lower bitcoin price, higher electricity price, etc. they also increase their interest rate and the farm has to pay a lot more while earning a lot less so they have to either go bankrupt and shut down or sell their stored bitcoins to be able to pay their debt.

This is not the same for all miners around the world.

[illusioNiZt]

What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

Bitcoin miners can use futures just like any other commodity producer. That protects them against short term fluctuations, but if they cannot mine profitably in the long run, they cannot stay solvent.

I don't think that's a solution, using futures can end up in more loss, mining is only profitable if the expenses are in cover even after the price movements of Bitcoin.

[mk4]

What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

Either by running less mining hardware to decrease risk, or to have a well-thought-of and reasonably sized short position. Other than both, I think that's pretty much it.

[Upgrade00]

So, I was doing some research on how can I protect my earnings and came accross the information that in response to falling crypto prices and increasing energy expenses, publicly listed Bitcoin miners were forced to sell nearly all of the BTC that they've mined in 2022.

Businesses prepare for the eventuality of a market downturn when they venture out, minin businesses included and when preparing for this, you come up with ways to overcome it or to thrive in it.
Falling prices in Bitcoin is expected in crypto, but the current energy crisis may have surprised some, reason for the sell off by some miners.

What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

As a solo entrepreneur, you hedge up profits when the prices are high and the cost of operations are low, so then the reverse happens, you would be able to survive through the winter period.
Publicly traded companies operate differently and like all businesses during time ob market downturn they would need to cut costs (by laying off workers or cutting down on production) and maybe have diversified investments in other niches that could bring in profits.

[Aanuoluwatofunmi]

So, I was doing some research on how can I protect my earnings and came accross the information that in response to falling crypto prices and increasing energy expenses

The dealings for this two are different, when there's high probability that miners will pay higher fee for their energy utilization then that does not have any difference to cause with the bitcoin price because miners have their own way of increasing their own reward from transaction charges whereby when the mempool if full the transaction confirmation become tideous on a huge que and only a higher transaction fee can make it jump to the next to be confirmed, here the miners make something from it, while mining is an entire different game that solely demand on energy consumption for it activities but if a miner thinks the high pay rate for this energy supply is too much they can opt in for a renewable source with cheaper budget which has nothing to do with bitcoin price.

publicly listed Bitcoin miners were forced to sell nearly all of the BTC that they've mined in 2022.

Should that decision base on the account of high energy demands or bitcoin price, i think there's more to dig up in this regard than just the pay rate for their energy consumption, they may have other reasons.

Do you think hedging strategies could help us stay solvent amid the bear market?

No, miners aren't the one that determines the bitcoin price, neither does their holdings make a serious impact on the volatility in price, do don't only shrink the strategy, also change it there will always be bear and bull and that does not change anything from what we should expect.

[hugeblack]

In bitcoin mining, the price of bitcoin is not the only factor, but there are many variables such as electricity prices and their fluctuations, weather fluctuations, cooling prices, taxes and loans, as financing these projects comes from loans that are affected by interest rates, which will force them to sell part of the assets to cover their positions and other variables which does not depend on the price of bitcoin.

[franky1]

"core scientific" collapsed for two simple reasons

one:
its main customer was celcius who stopped paying their "contract" for cloud mining with core scientific(obvious reasons)

two:
core scientific was charging users at a hard ware breakdown that was fair, but an electric cost of over 10cents. which equates to a contract that costs more then the coin reward would give back. so people didnt buy it
..
however if you are mining for yourself the easiest hedge is..
price low.. buy dont mine
price high.. mine dont buy

that way you are always acquiring coin the cheapest way you can find

if you want to risk "hedging" or what others pretend is hedging but they actually mean leveraging
thats risky as thats just betting against the randomness of the speculative market by placing a bet on if you think it will go up or down
yep its gambling

the smart play is if you are finding the price is cheaper than mining it. then dont mine it.. buy it instead. put your electric bill money into buying coin. that way you are truly hedging against your mining cost by getting coin cheaper than your mining cost.

[jrrsparkles]

I think by managing their mined assets is the possible way, like they know how much bill has to be paid for running a month so at the time when bitcoin price is higher they can sell some of them to pay for bills in future so by doing this they don't have to sell BTC st bear market and keep holding until next bull season so its like compounding and results can be great if they analyse and manage.

[LegendaryK]

however if you are mining for yourself the easiest hedge is..
price low.. buy dont mine
price high.. mine dont buy

that way you are always acquiring coin the cheapest way you can find

the smart play is if you are finding the price is cheaper than mining it. then dont mine it.. buy it instead. put your electric bill money into buying coin. that way you are truly hedging against your mining cost by getting coin cheaper than your mining cost.

Considering some of the largest btc PoW miners are going bankrupt this year.

If you are a small miner , you are an absolute idiot guaranteed to lose more PoW mining than you make.
*The only exception to this , if you are stealing electricity and not paying for it.*

Did you ever watch Wars games with Matthew Broderick.
Just like their is no winner in thermonuclear war, their is no winner in proof of waste mining.
In Fact, the only smart move is not to play.  

The way the Big miners used to stay solvent, was not from proof of waste mining ,
it was from the extreme amount of free Venture capital money that funded their operations.
That VC money has dried up , now that the baby boomers are moving to safer non-speculative investments.
These forums always promote that BTC price always booms every few years, but those were the years of highest VC investment,
which are fading more every day.
So now all you can do is watch as the BTC price verse fiats shrinks like a balloon with a slow growing leak.
Don't expect any Proof of waste coin network to survive especially after the carbon taxes rip thru the PoW miners like razor blades.
And that is only if the PoW bans don't come 1st.

[franky1]

nope.. as said core scientific went bankrupt for other reasons

they were charging cloud mining customers over 10c electric rate, but looking at american rates they could have been located in many many many area's and got better rates

https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a

their main thing was they got hit by the contagion. having celsius as a main customer who stopped paying, and they didnt bother to acquire new customers using good worthy deals. instead they waited for the money to go dry where electric bills were due and then ask their remaining customers to cough up more money as "debt"(a loan(blackrock))

they were not running a good efficient business* with a good business deal offering to customers.

also core scientific were adjusting prices every quarter which shows they were not playing the business savvi game of locking in great rates at long term contracts

they were literally mining at a loss with no coverage or care to try to go efficient, nor switch paths when their mining cost went above price.. (they didnt acquire coin from market when coin was cheaper to buy than mine)

*there admissions of their hashrate and power usage shows they were not efficient(it measures out as using 300k OLD asics of 105thash at 3.25kw)(no hardware upgrades for 2 years)
rating at: 32thash/kwh

2022 hardware is ~140thash for 3kw which rates at 46thash /kwh
they were at 66% hardware efficiency..

as for electric. many states had a rate of ~$0.06 which they could have locked in for 2 years. but were instead at a ~$0.10 rate.. meaning electric was also at a 60% efficiency

in total they were paying
10cents for 32thash
when they could have been paying
6 cent for 46thash

easy math is
they paid
1cent per 3.2thash instead of
1cent per 7.6thash
which shows a efficiency rating of under 50%

outside of america they could have got electric at $0.04
which if using efficient asics they could have got a
1cent per 11.66thash efficiency

but because they didnt want to relocate, upgrade hardware, negotiate electric, or acquire new customers, or buy coin when prices were cheaper than mining. they allowed themselves to sink into their own quicksand of doom
also as for the "bitcoin price boom every few years"
well thats not VC related. that the deflation at play.
every time there is a halvening a year later is a ATH. followed by a correction that then lasts a couple years before the next boom
also carbon taxes.. well if you are located in a region that uses renewable then carbon taxes are your friend.. if you mine in a fossil power region. thats then not your friend.. but it helps out the markets
leg-end i know you adore PoS ethereum. but here is the thing. its value at underlying cost is only $50 now as admitted by ether influencers themselves "energy saving of 95%"
so their price is hanging up high in a speculative premium bubble due to arbitrage game play artificially holding it up.

wait for the pin to drop and burst that bubble.. and the correction to occur, you have been warned

[LegendaryK]

https://www.benzinga.com/markets/cryptocurrency/22/10/29445058/is-core-scientific-done-bitcoin-miner-needs-cash-warns-of-bankruptcy-as-stock-plummet

The Bitcoin miner is looking into a variety of strategic solutions for raising money.

According to Core Scientific, if the potential capital raise strategies fail, the company might have to seek bankruptcy protection.

Translated: No Venture Capital money showed up to save them.  

According to the miner's court filing, it is losing almost $53,000 every day to make up for Celsius' refusal to pay.

Now if Celsius refused to pay and proof of waste was actually profitable,
why not redirect those miners to mine BTC directly for Core Scientific and save their company from bankruptcy.
The reason is the electricity was worth more than the bitcoins generated, and no VC money to float the difference, that all folks.

Anyone need to declare bankruptcy , go into Proof of Waste mining and you will be bankrupt in no time.  

also carbon taxes.. well if you are located in a region that uses renewable then carbon taxes are your friend.. if you mine in a fossil power region. thats then not your friend.. but it helps out the markets
leg-end i know you adore PoS ethereum. but here is the thing. its value at underlying cost is only $50 now as admitted by ether influencers themselves "energy saving of 95%"
so their price is hanging up high in a speculative premium bubble due to arbitrage game play artificially holding it up.

wait for the pin to drop and burst that bubble.. and the correction to occur, you have been warned

Find me a grid that says they only supply you the renewable energy and sends all of that pesky 24x7 energy from coal & natural gas to everyone else.

Actually Ethereum energy savings after kicking out proof of waste is over 99.9% .  
Do I expect the lack of VC money to lower the price of all crypto, sure every asset will suffer,
but the difference is , PoW networks will die, PoS network will survive to thrive another day.
And I plan on stacking ethereum and other PoS coins to the roof and beyond at the big fire sale from the baby boomer switch to cash,
once in a lifetime opportunity that will set anyone who does it up for the rest of their lives, IMO.  

BTC will just be a footnote in history as the coin that refused to evolve , 7 transactions per second is so lame.

[franky1]

Now if Celsius refused to pay and proof of waste was actually profitable,
why not redirect those miners to mine BTC directly for Core Scientific and save their company from bankruptcy.

the way it worked was celcious was paying the monthly electric. via monthly contract payments. so that CORZ could accumilate coin and not sell at a loss. waiting for the price to rise cor the coin next year
or giving coin to celcius per quarter as their reward for contract

however when celcius stopped paying because corz were asking for too much in its contracts. and obviously celcius had issues with its own money.. thus unwilling to pay.
corz was not then paying its electric bill and then needed to sell coin at a loss to then pump fiat into the electric company to keep going a few more months.

The reason is the electricity was worth more than the bitcoins generated, and no VC money to float the difference, that all folks.

you gave a very simplistic answer.
the real reason is corz didnt take the opportunity to relocate or upgrade to be more efficient. nor seek out new customers to replace celcius gap
 they just plodded along and asked for a loan multiple months back from their other existing customers(blackrock).. rather than asking blackrock to just buy more contracts
(obviously blackrock wouldnt just buy new contracts at higher prices so yea blackrock done a loan instead.. corz stupidly accepted that deal)

Anyone need to declare bankruptcy , go into Proof of Waste mining and you will be bankrupt in no time.

you are proclaiming "all mining" yet using a case scenario of one mining farm example of a inefficient farm that was not business savvi
i fully agree greedy companies that demand too much from customers will lose customers. i agree dumb companies that are not business savvi will lose money.

but that does not make the whole industry non-profitable. it just means too many dummies in the babies basket where all you can hear is the crying due to the dummies that get lost

also carbon taxes.. well if you are located in a region that uses renewable then carbon taxes are your friend.. if you mine in a fossil power region. thats then not your friend.. but it helps out the markets
leg-end i know you adore PoS ethereum. but here is the thing. its value at underlying cost is only $50 now as admitted by ether influencers themselves "energy saving of 95%"
so their price is hanging up high in a speculative premium bubble due to arbitrage game play artificially holding it up.

wait for the pin to drop and burst that bubble.. and the correction to occur, you have been warned

Find me a grid that says they only supply you the renewable energy and sends all of that pesky 24x7 energy from coal & natural gas to everyone else.

i personally live in a nuclear power region... thank you, enjoy,
many mining pool locate themselves within 20 miles of a hydro or nuclear power plant and do deals with the power plant direct

(hobby miners using residential rate cant do those deals becasue they are bill payers that use billing agents, that are one step power from the producers)

Actually Ethereum energy savings after kicking out proof of waste is over 99.9% .  

no its not.
if you calculate the validators at a 300w PSU of a normal PC . vs coins.
and compare that the the old PoW mining. its about 95%

there 99.95% WAS a projection thinking there would only be like a dozen validators(they were only counting the main custodians, like coinbase and a dozen others)

in short ethereum PoW was about $900 underlying cost value with a $1.4k market (1.5x speculation) and now ethereum PoS about $45 cost value with a $1.2k market(26x speculation) if you add up all the asics vs validators respectively (and compare it to market price respectively)

[fennic]

GM bitcoin fam.

So, I was doing some research on how can I protect my earnings and came accross the information that in response to falling crypto prices and increasing energy expenses, publicly listed Bitcoin miners were forced to sell nearly all of the BTC that they've mined in 2022.

IMG from the original source: https://imgur.com/VSPSlfi

What I'm wondering here is if there is a way for miners to hedge against shrinking margins? Do you think hedging strategies could help us stay solvent amid the bear market?

Source:
https://tokenist.com/public-bitcoin-miners-forced-to-sell-99-mined-btc-in-2022-report/

There are a lot of methods where you can avoid liquidity crisis and these are listed below.
1.Covert To Fiat
Fi you want to save your balance in Bear market than convert into fiat and when time will come than just buy it at a right time.
2.Over Leverage Control
I have seen that many people like myself also Goten Into Leverage trap where we buy a lot of leverage and end up in liquidity. And that's why I am just staying away from this. And in future stay away from these things.

[LegendaryK]

Now if Celsius refused to pay and proof of waste was actually profitable,
why not redirect those miners to mine BTC directly for Core Scientific and save their company from bankruptcy.

the way it worked was celcious was paying the monthly electric. via monthly contract payments. so that CORZ could accumilate coin and not sell at a loss. waiting for the price to rise cor the coin next year
or giving coin to celcius per quarter as their reward for contract

however when celcius stopped paying because corz were asking for too much in its contracts. and obviously celcius had issues with its own money.. thus unwilling to pay.
corz was not then paying its electric bill and then needed to sell coin at a loss to then pump fiat into the electric company to keep going a few more months.

The reason is the electricity was worth more than the bitcoins generated, and no VC money to float the difference, that all folks.

you gave a very simplistic answer.
the real reason is corz didnt take the opportunity to relocate or upgrade to be more efficient. nor seek out new customers to replace celcius gap
 they just plodded along and asked for a loan multiple months back from their other existing customers(blackrock).. rather than asking blackrock to just buy more contracts
(obviously blackrock wouldnt just buy new contracts at higher prices so yea blackrock done a loan instead.. corz stupidly accepted that deal)

Anyone need to declare bankruptcy , go into Proof of Waste mining and you will be bankrupt in no time.

you are proclaiming "all mining" yet using a case scenario of one mining farm example of a inefficient farm that was not business savvi
i fully agree greedy companies that demand too much from customers will lose customers. i agree dumb companies that are not business savvi will lose money.

but that does not make the whole industry non-profitable. it just means too many dummies in the babies basket where all you can hear is the crying due to the dummies that get lost

also carbon taxes.. well if you are located in a region that uses renewable then carbon taxes are your friend.. if you mine in a fossil power region. thats then not your friend.. but it helps out the markets
leg-end i know you adore PoS ethereum. but here is the thing. its value at underlying cost is only $50 now as admitted by ether influencers themselves "energy saving of 95%"
so their price is hanging up high in a speculative premium bubble due to arbitrage game play artificially holding it up.

wait for the pin to drop and burst that bubble.. and the correction to occur, you have been warned

Find me a grid that says they only supply you the renewable energy and sends all of that pesky 24x7 energy from coal & natural gas to everyone else.

i personally live in a nuclear power region... thank you, enjoy,
many mining pool locate themselves within 20 miles of a hydro or nuclear power plant and do deals with the power plant direct

(hobby miners using residential rate cant do those deals becasue they are bill payers that use billing agents, that are one step power from the producers)

Actually Ethereum energy savings after kicking out proof of waste is over 99.9% .  

no its not.
if you calculate the validators at a 300w PSU of a normal PC . vs coins.
and compare that the the old PoW mining. its about 95%

there 99.95% WAS a projection thinking there would only be like a dozen validators(they were only counting the main custodians, like coinbase and a dozen others)

in short ethereum PoW was about $900 underlying cost value with a $1.4k market (1.5x speculation) and now ethereum PoS about $45 cost value with a $1.2k market(26x speculation) if you add up all the asics vs validators respectively (and compare it to market price respectively)

I thoroughly enjoyed your explanations of why core scientific declared bankruptcy,
what is your enlighten complex view on the other two big ones.

Compute North, the second largest bitcoin mining hosting provider in the US, filed for Chapter 11 bankruptcy .
Greenidge Generation Holdings Inc., once one of the largest public Bitcoin miners in the US, warned that it may seek bankruptcy protection  


As far as the 99.9% , I was getting that from
https://consensys.net/blog/press-release/ethereum-blockchain-eliminates-99-99-of-its-carbon-footprint-overnight-after-a-successful-merge-according-to-new-report/

A new report from CCRI (Crypto Carbon Ratings Institute), commissioned by ConsenSys, reveals that the transition from Proof of Work to Proof of Stake has reduced the electricity consumption and carbon footprint of the Ethereum network by over 99.988 % and 99.992%, respectively.

FYI: Just because a power supply has a max rating of 300watt does not mean that PC is using the full 300 watts.
I had an 600 watt power supply and according to the UPS data was only drawing between 80 to 120 watts on average.
https://energyusecalculator.com/electricity_computer.htm

We estimate that an average modern desktop PC will use approximately 100 watts of power,

[Darker45]

Bitcoin miners have to sell. Their revenue comes from the Bitcoin they earn as block rewards. So, if they want their operations to continue, they will have to liquidate their Bitcoin every now and then. Well, if they wish to keep their Bitcoin for some time for selling later on when the price is much higher, they could probably choose to use them as collateral instead and take a loan.

But the point is Bitcoin miners can't be HODLers forever. However, if the price is so low vis-à-vis the energy expenses, among other operational costs, then the option would be to shut down. And since Bitcoin's price is cheaper than the cost of running business, as franky1 have mentioned, isn't it, then, logical to just use the money intended for the operation to directly buy Bitcoin instead? Business could resume anytime things get better.

[ethereumhunter]

What I see from these miners is that they have to be able to use renewable energy sources and reduce the huge electricity costs to run a bitcoin mining company. If they still pay exorbitantly high electricity costs, they will be depleted and unable to hold onto the bitcoins they have earned from mining.

After that, I wondered how much tax they have to pay the government to run the bitcoin mining business but I guess the tax is not that big either. Supposedly, those who have accumulated more bitcoins than others can sell their bitcoins when the bitcoin price peaks and then invest in renewable energy sources so that they can replace the energy sources they use. Maybe we can ask in more detail about the company that runs the bitcoin mining so we know what the real problems they are facing are.