30 May 2022

Which public miners are best prepared for a bear market?

Bitcoin miners are currently fighting their way through the bear market - a time when winners and losers are made. Which public miners are best prepared?
Source: Tradingview (Coinbase), Hashrate Index
Looking at the bitcoin price relative to the bitcoin production cost, we see that profit margins have taken a massive hit in recent months. Given a bitcoin price of $31k, the Antminer S19 has a cash flow per BTC of $23k, which is not bad, but we should remember that this number was more than $50k at the peak in November. Things look worse for the S9, which has a cash flow of only $8k per BTC.The falling profitability of mining has led many to speculate about increasing M&A activity, and potentially even some bankruptcies going forward. To gauge which miners are the best prepared to get through the bear market and even potentially capitalize on it by buying assets of distressed competitors, it's essential to look at two factors: each company's bitcoin production cost and the strength of their balance sheets.Based on the most recent information, Riot has the lowest power prices of the top 5 miners by market cap, only paying $24 per MWh. Still, we should be aware that power prices have likely increased for all these companies.
Source: Most recent public disclosures (Core Scientific, Marathon, Riot, Hut 8, Bitfarms)
Riot also has the least debt relative to equity, with a debt-to-equity ratio of 0.1. Core Scientific has the most debt, with a debt-to-equity ratio of 1.4. The current ratio measures the liquidity of a company. Here Marathon is the strongest with 40. While Marathon has a high bitcoin production cost compared to its competitors, it has a strong balance sheet with little short-term debt.Overall, based solely on its low power cost and healthy balance sheet, Riot seems to currently be in the strongest position of the five biggest public miners by market cap.
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