Opinion: miners should manage risk more carefully
Two Prime investment director Nathan Cox spoke about the risks he sees in the cryptocurrency mining industry.
First of all, he noted the difficulties that miners faced last year, as well as the record value of leverage in the mining industry. The situation was exacerbated amid rising energy costs and a decline in the price of equipment that acted as collateral. As a result, insufficient risk management led to problems that can be prevented or solved by hedging.
Nathan Cox pointed out the simplicity of the strategies used by the miners. They consisted of buying and holding bitcoins. There was also a very active purchase of equipment at high prices. Now it is impossible to rely only on this strategy.
The expert believes that if bitcoin is a commodity, it should be treated accordingly, implementing sophisticated financial strategies and risk management. Other industries may serve as an example, where forward contracts with targeted redemption or a structured finance contract are actively used. In any case, according to Cox, miners should pay attention to what the traditional market has been using for decades.
In any case, risk management requires a more responsible attitude and, according to Nathan Cox, it is time for miners to think about long-term growth strategies instead of using borrowed funds in the absence of capital controls.