The price of Bitcoin (BTC) fell by 64.68% to $16,870 from around $47,766 at the beginning of the year, CryptoSlate data shows. At the same time, share prices of Bitcoin mining companies fell by 91% on average from their 52-week high prices, according to Compass Mining.
However, this has not deterred mining firms from increasing their Bitcoin mining capabilities throughout 2022, as per a Compass Mining report. CleanSpark, for instance, grew its BTC mining hash rate from 1.9 EH/s at the start of 2022 to 6.0 EH/s or about 62,000 miners to date — an increase of 189%, the Compass Mining report stated.
Bit Digital and Riot Blockchain bumped their hash rate by 157% and 148%, respectively. Additionally, according to the report, Bitfarms, Digihost, and Marathon Digital Holdings each increased their mining hash rate by 100%.
The increasing mining capabilities inevitably led to increased Bitcoin production throughout 2022. For example, Riot Blockchain has mined 4,872 BTC as of November 2022 compared to 3,812 BTC and 1,033 BTC produced in 2021 and 2020, respectively.
CleanSpark has produced 4,157 BTC year-to-date compared to 1,528 BTC mined in 2021, as per the report. On Dec. 21, Bitfarms announced that it had mined its 5000th BTC in 2022, leaving behind its record of mining 3,452 BTC in 2021.
Miners bought BTC in a bullish spirit, then sold them amid a liquidity crunch
In early 2022, despite Bitcoin slipping far below its all-time high of $69,000 set in Nov. 2022, miners were still bullish on the market, the Compass Mining report stated. Therefore, many miners proceeded to use their cash reserves to purchase BTC in addition to mining them.
In the first week of January 2022, Bitfarms announced the purchase of 1,000 BTC for $43.2 million, increasing its BTC holdings by 30%. In the second half of January, Argo Blockchain bought 172.5 BTC.
Bitfarms sold 7,309 BTC in 2022, including the 1,000 BTC purchased in January, while Argo Blockchain also sold most of its BTC at much lower prices. Both firms also borrowed large sums — Bitfarms entered into a $32 million mining equipment financing agreement with BlockFi, while Argo Blockchain released terms of extensive loans from New York Digital Investment Group — to fund growth.
With the bear cycle running full steam, most miners faced liquidity issues. Core Scientific got the most brutal hit, leading it to declare bankruptcy under Chapter 11 on Dec. 21. Greenidge is also undergoing restructuring in order to avoid bankruptcy and Argo Blockchain was also delisted from LSE amid bankruptcy fears.