Wexboy
Wexboy 7 minutes reading from Bitcoin

Here’s What Bitcoin Price/Cryptomining Really Happened, For Example, $20K Again

BTC goes 20K+ again...a real good news/bad news event for cryptominers!

🧵

goodnews cos BTC was up nrly +5% y'day to surpass 20K & is up another +3% today...

...which ignited a +16% rally for US cryptominers y'day & a +39% gain for ARB today!

BTCUSD — Bitcoin Chart and Price — TradingView

But alas, tht DOESN'T change the bad news:

BTC is 20.9K right now...

...precisely EQUAL to the avg 20.9K BTC price we've seen in H2-2022 to date, which of course is the reason (despite the latest surge) cryptominers are (still) DOWN 90-95%+ off their 2021 highs!

So while 20K wd appear to be a KEY psychological pivot/inflectionpoint for cryptomining investors...

...in reality, a 20-21K BTC price is meaningless, i.e. nothing's changed in financial terms, and unfortunately it confirms investors still DON'T get the big picture here.

Let's ignore the return on capital/debt/dilution issue as a whole other education...

...a more obvious problem is tht so many cryptomining punters still don't appear to actually grasp that cryptominers are LOSING money (& their cash burn/consumption FAR exceed those losses).

The blame can be shared equally:

I've never seen any kind of serious inv't analysis from cryptomining investors - despite 90-95%+ LOSSES they're STILL relying on hope & delusion, rather than cold hard financial analysis/logic...

...BUT the miners also keep exploiting this.

And I say miners, 'cos this is all borrowed from the original (natural resource) miners, who spawned the phrase:

'A mine is just a hole in the ground with a liar on top!'

Even if they ever actually deliver on their bluesky promises, shareholders invariably get destroyed by the debt & dilution (& share price volatility) along the way...

...and a key reporting trick (to keep the merry-go-round going) is also stolen from the original miners.

It's the cash cost of (& cash profit from) production, a basically meaningless metric tht the punters cannot help falling in love with...

...with the cryptominers focusing/reporting on their (adjusted gross) miningmargin.

Gullible punters count this as actual NET PROFIT...

...well, most of them, I rem one plonker on Twitter last year who literally argued/insisted that ARB's revenue was somehow its net profit & it was actually going to DOUBLE in the next mth/two!

🤯🤡

'Course, it isn't REMOTELY related to actual net profit...eg take a look at ARB's interims:

As they shd, they back out gains/losses on crypto hldgs...BUT they also back out depreciation of their mining equipment & IGNORE all G&A/interest/tax expense!

Investegate |Argo Blockchain PLC Announcements | Argo Blockchain PLC: Interim Half Year Results 2022

Tht's a meaningless snapshot of an (adjusted) grossmargin...

...which has also collapsed this year, bt is still touted as positive, as if this somehow represents a profit!?!

In reality (in aggregate), the miners' cryptomining operations have actually LOST MONEY in H1-2022...

Take:

RIOT (up +16% & +7% y'day/today)

MARA (up +14% & +2%)

ARB (up +19% & +42%) at the other mkt cap extreme

As a proxy for all the listed cryptominers...

So, if we take H1 revenue, less direct costs, less depreciation, less G&A, less interest expense (tax expense is now irrelevant...

...and IGNORE all realized/unrealized crypto holdings & inv'ts losses/impairments & all other non-cash P&L income/expense...

...we arrive at an actual profit/loss for their cryptomining operations.

And yes, in aggregate, they're LOSING money...

...broken down as a (marginal) 10M profit for RIOT, vs. an (11)M loss for MARA, vs. a (7)M loss for ARB.

'Course, these losses are exacerbated by all the debt & dilution along the way, plus losses/impairments on their crypto hldgs/inv'ts & all compounded by their ferocious cash burn/consumption (MULTIPLES of their mining losses)...

...which again explains their 90-95%+ collapse.

But the REAL killer here - and I don't see ANY cryptominers highlighting it, or cryptomining investors calculating it - is tht the AVERAGE BTC price in H1-2022 was actually...

...36,875!

🤯😱

So if miners cd NOT make a damn cryptomining profit at 36.9K in H1, AND mining difficulty's gotten worse since, AND the H2 average/today's BTC price is 20.9K...

...how the hell is 20K at all relevant/positive for investors & HOW THE HELL do miners make a profit here?!?

It's truly astonishing seeing basic math & financial logic being IGNORED here...

...and seeing even more (fresh) suckers being led astray/eviscerated by cryptomining pumpers.

BUT tht's FinTwit...they'll never retweet this, bt they'll make a 'BTC to the 🚀🌕' tweet go viral!

And some replyguy will insist I'm wrong, 'cos the cryptominers will jst add more machines/capacity & make a bluesky fortune...

...which reminds me of the old (cash-burning) startup joke:

'Yes, we lose money on the price...but we make it up on the volume!'

😂

This post is based on this twitter thread.

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