The crypto market has had a challenging year in 2022, particularly with the recent price fluctuations of Bitcoin (BTC). These price movements suggest that bears are not ready to loosen their grip on the market. The declining crypto prices also mean reduced profits for Bitcoin miners. The recent regulatory action by US lawmakers, which involves requesting energy consumption data from four major BTC mining companies, only adds more pressure to an already fragile situation.
Despite the bearish climate, most Bitcoin miners remain optimistic about the short and long-term prospects of Bitcoin’s price. Canaan’s senior vice president, Edward Lu, shares similar sentiments and discusses the changes happening in the mining industry. He highlights the shift of mining activities from China to the US, particularly in Texas, due to the availability of cheaper electricity and favorable policies. Lu also mentions the growing synergy between Bitcoin mining and the oil and gas and big energy sectors in the US and the Middle East.
When asked about the current challenges faced by industrial miners, Lu acknowledges that while there may be a drop in profitability in the short term, the mining industry remains healthy and profitable in the long run. He explains that factors such as machine cost, energy cost, infrastructure cost, and daily maintenance expenses contribute to the overall profitability of the mining industry. Lu believes that as long as the Bitcoin price does not drop below $15,000, miners can continue to make a profit.
Lu also addresses the upcoming Bitcoin halving and its impact on ASIC efficiency. He explains that as technology improves, machines become more efficient and consume less power. He emphasizes that while the Bitcoin mining reward is halved every four years, the profitability of the mining industry depends on various factors, including machine costs, infrastructure costs, energy costs, and the Bitcoin price. Lu does not believe that ASICs must become more powerful and use more power with each halving.
Lu further discusses the growing synergy between traditional energy companies and Bitcoin mining. He explains how energy companies can utilize wasted energy and convert it into a storable value through Bitcoin mining. This evolution in the mining industry, with the involvement of energy companies and institutional investors, brings more professionalism, transparency, and long-term goals to the industry.
Lu believes that Bitcoin has become a legitimate asset and is increasingly correlated with traditional financial markets. He sees this as a positive development that will lead to the mass adoption of Bitcoin as an investment asset. He also addresses concerns about the industrialization of mining and Wall Street’s involvement, assuring that Canaan focuses on individual machines that allow mining at home, promoting decentralization.
In conclusion, Lu expresses his confidence in the industry and the future growth of Bitcoin. He believes that the current crisis in the market presents more opportunities than challenges. He draws on the Chinese word for crisis, which consists of two characters: danger and opportunity. Lu sees this moment as a time of opportunity for miners, manufacturers, infrastructure builders, energy companies, and traditional financial investors.
Overall, Lu’s insights provide a positive outlook on the mining industry and Bitcoin’s future, highlighting the evolving nature of the industry and its potential for growth and adoption.