Data shows that most public Bitcoin mining companies have been accumulating losses during their lifetime.
Bitcoin mining companies have been losing money over the years
According to Arcane Research’s latest weekly report, among public miners in the red, Core Scientific has particularly large losses of $1.3 billion.
The relevant concept here is “retained earnings”, which is a measure of the total cumulative net income of any business over its lifetime.
When this metric has a negative value, it means that the company in question has incurred a net loss over its lifetime.
Here is a chart showing retained earnings data for the largest public Bitcoin mining companies:
Looks like the value of the metric has been below zero for almost all the firms | Source: Arcane Research's The Weekly Update - Week 38, 2022
As you can see from the chart above, the retained earnings of almost all public Bitcoin mining companies have been negative.
This means that over their lifetime, these companies have been accumulating a net amount of losses. Core Scientific is the deepest in the red, with miner losses totaling more than $1.3 billion.
Riot and Marathon are the next underwater mining companies, but both managed to keep their losses to less than half of Core’s.
Argo is the only public miner to have maintained earnings above zero, having accumulated modest earnings of around $26 million over its lifetime.
The report points to several reasons behind the poor performance of these companies. First, these companies have been spending far too much on administration-related costs compared to other industries such as gold mining.
The second factor is that the Bitcoin investments of these miners did not turn out to be favorable. Under bear market pressure, they had to sell their reserves to reduce risk and avoid liquidation.
And finally, the highly profitable 2021 bull run caused mining companies to over-expand their facilities. Last year’s record profits disappeared as soon as the bear hit, leaving miners with a glut of rigs that have been producing far less income.
At the time of writing, the Bitcoin price is hovering around $19.3 million, down 1% over the past week. Over the past month, the crypto has lost 3% in value.
The chart below shows the coin’s price trend over the past five days.
The surge in the value of the crypto above $20k doesn't seem to have lasted for long | Source: BTCUSD on TradingView
Featured image from Brian Wangenheim on Unsplash.com, charts from TradingView.com, Arcane Research