Mining does not forgive mismanagement
On August 5, 2024, the Bitcoin exchange rate showed a local minimum of $49,000 (Binance), and 3 months later, it began to consistently update all-time highs (ATH) and climbed above $90,000. However, not all mining companies have survived to this happy time!
On August 24, 2024, Texas-based Rhodium Enterprises (3.8 EH/s), once the fifth-largest bitcoin mining company with assets of about $500 million and debt of up to $100 million, filed for voluntary bankruptcy. In July, the company was unable to repay a $78-million business development loan it had received in 2021. Debt restructuring proposals were rejected by creditors, and the attempts to save the company ended there. Lenders and shareholders are disappointed by "executive team mismanaging the company during the bear market", despite its competitive power costs ($0.022/kWh!)
Rhodium's story is, of course, to be continued, but its case serves as a warning to everyone who loses touch with reality as they toy around with increasing mining capacity using credit funds. As a result, halving or any other critical event leads to the need to reorganize the business through the court (Core Scientific, 2022), or to its loss in one form or another (M&A).
Usually, companies that have chosen the path of the samurai, but couldn't power through it, are picked up by someone more successful. For example, on June 27, 2024, CleanSpark (17.3 EH/s, 3rd largest capacity) announced the takeover of GRIID along with its $50 million debt and 68 MW of capacity (Tennessee), as it simultaneously bought 5 other small mining enterprises (Georgia) with a combined capacity of 60 MW.
And on August 21, 2024, the Canadian mining company BitFarms (7 EH/s, 9th largest capacity) announced the takeover of the American company Stronghold with debts of $50 million and 4 EH/s hashrate. In both cases, the absorbed companies had significant growth potential, but due to strategic management miscalculations, they could not maintain themselves as separate players.
Interestingly, in turn, BitFarms itself was in the process of a hostile takeover by Riot Platforms (12.6 EH/s, 4th place), which only recently replenished its hashrate with 60 megawatts of the American mining company Block Mining purchased in June 2024.
So, a difficult market period is always accompanied by bankruptcies, mergers and acquisitions, when weak players become easy prey for the strong. Despite the fact that this process never stops, in April 2024, halving dotted all the Is again, and its echo will resound for a long time over the global mining valley, where many giants have barely recovered from the shocks of 2022. For instance, Core Scientific (20.4 EH/s, 2nd place) is also patching holes with $400 million in convertible bonds, and Argo Blockchain (2.7 EH/s) only paid off the lender in full on August 12, 2024 on a $35 million taken out to prevent bankruptcy back then.
The reasons for these processes are as obvious as the companies’ irresistible desire to take on more risk than the market can forgive. As a rule, they are killed by loans that must be paid for from future profits, the amount of which is undermined by such traumatic events as the bankruptcy of FTX in 2022 or the halving of 2024.
In the fall of 2022, we described in detail how almost all tokenized hashrate projects died, and also showed how much more efficient Minto is than large mining companies. Today, after halving 2024, it's high time to remind you why Minto remains successful despite the constant testing of the industry by the market.
Why Minto remains successful
Minto does not use credit funds for development. The Minto team began to prepare for halving in advance, proposing to the community to improve the mechanics of reward distribution and create a community-managed Treasury at the end of 2023 as part of Vote №7. Then, in March 2024, as part of Vote №9, MInto proposed to use Treasury funds for the purchase of new energy-efficient miners in order to prevent the negative impact of halving on project profitability and achieving updated energy efficiency targets.
The Minto community supported both initiatives, and today we can summarize the results of their practical implementation.
Thus, in the process of replacing outdated equipment, more than 50% of the mining power was turned off, and then about 95,000 TH/s of energy-efficient hashrate were put into operation, which allowed to achieve a total hashrate of 144,000 TH/s. Back in May 2024, the project’s Average Energy Efficiency (AEE) was 49.2 W/TH, and the Customer Energy Efficiency (CEE) was 34.2 W/TH.
Now, Minto's AEE reached 30.0 W/TH and CEE reached 28.5 W/TH.
Taking into account the mining realities that have changed dramatically after halving, our approach has fully justified itself and allowed us not only to maintain profitability, but also to ensure high profit growth potential in the next 4-year cycle.
The graph of the mining break-even threshold clearly shows how, as a result of halving, mining profitability had decreased almost 3-fold by May and since then has continued to fluctuate at extremely low levels, which have become critical for many mining companies. In such conditions, it is impossible to generate profit to cover previously assumed obligations, it is too late to update equipment or make any decisions, because the moment has long been lost.
In this sense, Minto again proved to be more successful than many, even quite large industry players, and the Minto community strategically outplayed the companies that bet on rapid growth at the expense of borrowed funds and did not take into account the risks of a critical reduction in revenue.
However, Minto never stops there. By strengthening its position in the post-halving reality, Minto continues to increase its energy-efficient hashrate by buying hardware from inefficient companies at low prices. At the end of October, as part of VOTE#10, the Minto community approved the decision to double (or even triple) the hashrate with the AEE target to 33 W/TH. The process has already started!
In addition to the solutions that allowed Minto to prepare for halving, there are other innovations that traditionally allow Minto to remain one of the most successful mining companies, including tokenization of its hashrate, specifically, a smart 65% mining hardware uptime algorithm, allowing us to manage mining profitability in conditions of cyclically variable electricity prices.
Minto publishes monthly reports, analyzing a hypothetical profit in 100% uptime mode along with real figures. The comparison shows that the algorithm demonstrates impressive results, reducing Minto's operating costs for electricity to a minimum, thereby increasing its profitability daily despite a decrease in revenue.
Minto is a company capable of resisting market negativity using its own internal reserves rather than loans, a strategic approach to its development and the direct participation of the community in project management.
Minto is tirelessly proving its worth in all business and development aspects, and our community offers reliable support in implementing these aspects in life.
New challenges certainly lie ahead, but today it is more obvious than ever that all of us together will be able not only to adequately confront them, but also to create conditions for significant profits during favorable market periods!
