Investor interest in cryptocurrency miners like Riot Blockchain (NASDAQ:RIOT) is starting to resurface, despite the current crypto bear market. The strong selloff has driven several businesses in the sector to their knees.
Some investors have dubbed this the first crypto bear market due to the relatively recent adoption of Bitcoin (BTC-USD) and other cryptocurrency payment systems, however, Bitcoin has seen selloffs similar to this at least twice before.
So What Has Riot Blockchain Been Up to Lately?
Throughout the crypto bear market, the company has been producing Bitcoin very well in the background. The last three months’ production data have averaged 402 tokens per month, with June’s output coming in lower than usual at 318 coins.
Riot Blockchain (NASDAQ:RIOT) now ranks among the top producers, which is a great accomplishment. Marathon Digital (NASDAQ:MARA) used to be frequently regarded as the industry leader in bitcoin mining, but Riot Blockchain has been putting in more spectacular numbers lately, and investors should surely take notice.
One or two items are often produced at a time by crypto miners, and for Riot Blockchain, that product is Bitcoin. Although the company also offers other Bitcoin-related services, mining production is by far its largest source of income, so investors should pay close attention to any disruptions to this area of its operations.
Bitcoin Production Declines During Crypto Bear Market
Recently, Riot Blockchain (NASDAQ:RIOT) revealed that it was trying to reduce the price of electricity, which would lead to a decrease in production in July. This was the cause of the sequential monthly Bitcoin output for that month declining by 24.5%.
This information is especially troubling during the crypto bear market because power is one of the major direct costs involved with production and the corporation has very little control over its pricing. Additionally, assuming that the efficiency of the mining fleet does not change dramatically, the average difficulty of mining each token will climb greatly as more bitcoins are created.
This means a higher cost of electricity per token. Electricity is literally money over time for bitcoin mining companies and an added negative during the crypto bear market.
Bitcoin mining companies employ a fleet of high-tech computers to crack tricky cryptographic puzzles in the hopes of being rewarded. Solving a block is a frequent term used to describe the procedure.
The possibility of earning Bitcoin increases as the fleet’s total computational power (often referred to as its hash rate) rises.
Given that many miners have expressed plans to considerably boost overall production capacity in the hopes of raising Bitcoin production for the next significant move upward, the high electricity costs that miners are now facing can prove rather troublesome in this regard. Riot Blockchain (NASDAQ:RIOT) was no exception to this norm as the company had long informed shareholders of its aggressive growth intentions.
What Does the Future Hold for Riot Blockchain in Crypto Bear Market?
Although there is a chance that Bitcoin will fall deeper from here, the token is very stable between $20,000 and $25,000. It is significant to stress that this is not an area where Bitcoin mining businesses may make money. Many of them estimate that each token will incur direct costs of around $10,000 and total costs of up to $30,000 per. The wonderful thing about top-tier miners like Riot Blockchain is that they are able to keep enough liquidity to somewhat weather downturns.
Riot is still one of the top Bitcoin mining companies and can probably survive a recession just fine, even though the production story is uncertain given the recent curtailments. That’s why most analysts still consider Riot a long-term buy.
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