Bitcoin Mining: A Positive or Negative Indicator for the Future of Crypto?

The sector was hit with a wave of lawsuits, resignations and bankruptcies in 2022, and yet the Bitcoin network’s high hashrate remains a sign of faith.

AccessTimeIconJan 3, 2023 at 6:43 p.m. UTC
Updated Jan 3, 2023 at 7:56 p.m. UTC
AccessTimeIconJan 3, 2023 at 6:43 p.m. UTCUpdated Jan 3, 2023 at 7:56 p.m. UTC
AccessTimeIconJan 3, 2023 at 6:43 p.m. UTCUpdated Jan 3, 2023 at 7:56 p.m. UTC

In a piece last week titled “Crypto will be fine,” former CoinDesker Brady Dale noted that even though crypto took a beating throughout 2022, some indicators remained bullish. Notably, Bitcoin’s hashrate, which is how much computational power is directed toward securing the network, held steadfast.

“If the industry were dying, these miners should be winding down. They aren't,” Dale wrote. Indeed, according to Blockchain.com data, Bitcoin’s hashrate hit an all-time high in November.

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Bitcoin’s hashrate rose steadily over the past 12 months even as the network’s token, bitcoin (BTC), lost over two-thirds of its value. For many, that is a sign of faith in the long-term success of the network.

Of course, there’s more to the story than a single statistic. As Compass Mining’s Zack Voell (another ex-CoinDesker) detailed in a Monday report, the bitcoin mining industry took a series of beatings in 2022.

In his catalog of “all of the bad things that miners suffered,” Voell found that at least four executives of major mining firms resigned over the year, six lawsuits were filed against mining companies – for reasons stretching from breach of contract to zoning rule violations – and stocks for publicly traded mining companies were in the doldrums.

Additionally, two mining companies, Core Scientific (CORZ) and Compute North, filed for bankruptcy while Celsius Network and BlockFi, two bankrupt crypto lending firms with sizable mining wings, are likely going to have to restructure their operations. Another two mining companies, Marathon Digital (MARA) and Argo Blockchain (ARBK), are also at risk of filing for bankruptcy.

The situations vary by firm, but the main causes of the issue stem from bitcoin's depressed price and, often, poor treasury management. My colleague George Kaloudis simplified the picture by saying that over the last few years, many mining companies pursued accelerated growth strategies financed by debt and other investments while often choosing to hold onto their mined coins.

"Many miners acted too deterministically," projecting bitcoin would hit $100,000, Juri Bulovic, head of mining at crypto mining and staking firm Foundry, which is owned by CoinDesk’s parent company, Digital Currency Group, told CoinDesk’s Eliza Gkritsi. The situation worked well when bitcoin’s price was rising and the cost of financing expansion was cheap – two things thrown off course amid macroeconomic uncertainty and rising interest rates.

Already, outside firms have been stepping in to backstop losses and inject much-needed capital into the lagging professional mining sector. Galaxy Digital struck a $100 million deal with Argo, crypto exchange Binance has spun up a fund for distressed miners, and on Tuesday, investment giant BlackRock committed $17 million to bankrupt bitcoin miner Core Scientific.

Although the mining sector is in a precarious position – fueled in part by state-of-the-art mining equipment that was ordered and deployed during the heady days of 2021, when bitcoin hit a high of nearly $69,000 – the industry isn’t likely going to be wiped off the map. Battle-tested firms have better treasury management, and new financing options are coming online – like derivatives options from Two Prime that could allow miners to hedge their mining risks in a way that other commodities markets like oil do.

More capitulation and bankruptcies could come, and unprofitable miners may be taken offline. But considering the global sprawl of the mining industry, the sectors’ committed activist investors and supporters and the growing importance of mining within the hydrocarbon and wider energy sector, mining will remain. And the business might be better for its recent troubles.


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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Daniel Kuhn

Daniel Kuhn is a deputy managing editor for Consensus Magazine. He owns minor amounts of BTC and ETH.