Bitcoin mining presents ‘risks that are difficult to assess,’ says Cipher Mining CEO


Cryptocurrency investors should keep track of the various costs associated with mining Bitcoin, Tyler Page, CEO of Bitcoin Cipher Mining (CIFR), said in an interview with Yahoo Finance Live on Wednesday.

“2022 for the entire Bitcoin mining industry, I think it’s really going to be about execution,” Page said.

Cipher Mining, which says it is dedicated to “providing and securing the vital infrastructure necessary for the Bitcoin network to thrive in the future,” made crypto headlines last October after buy several tens of thousands next-generation bitcoin mining hardware from Bitfury, a Bitcoin Blockchain infrastructure provider. The group is also supported by larger investors like Fidelity Management and Research and Counterpoint Group.

The opportunities are limitless this year, but costs will also be a significant challenge for mining operations seeking to capitalize, Page said.

“The big differentiator, and I think the investment world has to start to appreciate to differentiate these miners, is what kind of cost discipline do they have on major inputs?” He said. “[The main inputs including] the cost of energy, which is the biggest cost of operation, and the cost you pay for computing power or for the mining rigs themselves, which is the biggest CapEX expense.

Mining operations attempt to generate Bitcoin at a rate below market prices. It’s crucial, Page said, to factor in costs typically overlooked by investors to get a more accurate picture.

“The story of a miner is that you are effectively making Bitcoin much lower than the market price like any E&P type commodity business,” he noted. “So in addition to the variable costs, both the operating costs for running your facilities and paying for electricity or accommodation … you also have to think about depreciation and amortization of the costs. capital expenditure you have incurred ”.

Bitcoin miners have had a turbulent year to say the least in 2021. China has implemented a series of crackdowns on mining operations throughout the year, criminalizing them nationwide by the end of the year. of the year. Even with government restrictions, experts estimate that up to 20% of global mining is done in China (up from peaks of 65%) through underground mining.

A general view shows the Berlin geothermal power plant of La Geo Electrical Company, where the Salvadoran government has installed a Bitcoin mining facility for the use of bitcoin as legal tender, in Alegria, El Salvador on November 13, 2021. Photo taken with a drone. REUTERS / José Cabezas

Mining in the United States has increased dramatically in recent years. In October, the United States overtook China as the country with the highest number of crypto miners in the world. Research suggests that about a third of bitcoin’s hashrate is found in the United States, which is a 400% increase from last year.

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on twitter @IFanusia.

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