A decrease in the cost of natural gas reduces costs for miners

BTC miners after a long crisis have a reason to rejoice: the cost of natural gas has fallen by 75% since August, while cryptocurrencies, on the contrary, have grown. 

The profitability of mining companies largely depends on the cost of energy resources. Industrial miners have to rely on power grids, without fixed-rate contracts for the energy they purchase. 

The year 2022 showed how vulnerable the cryptocurrency mining industry is to changes in energy costs. 

Hosting companies, which had fixed-rate contracts with their customers and ended up spending more than they earned, were also under attack. Among the biggest bankruptcies of last year were Core Scientific and Compute North.

However, the situation could change dramatically. A warm winter caused natural gas demand to drop significantly. It coincided with a rise in the BTC exchange rate of about 40%. On this basis, many market participants believe that if this situation is prolonged, miners will be able to significantly reduce operating costs. 

The growth of economic indicators of cryptocurrency mining encourages miners, who previously had to shut down their equipment, to start working again. As a result, competition increases, which is reflected in an increase in hash rates. 

Ethan Vera, CEO of Luxor Technologies, notes the prospect of new partnerships in the industry:

Mining companies are finding the benefit of contracting with gas owners, which allows them to have a consistent supplier. 

The industry also notes the importance of stability over the long term:

Miners benefit from fixing the energy cost over the long term rather than moving to regions where prices are low but unstable.