An overwhelming number of public miners reported an unallocated loss on their balance sheets, despite a successful 2021. Such results were obtained by Arcane Research analysts.
The experts studied the financial statements of Argo Blockchain, Bitfarms, CleanSpark, Stronghold, Hut 8 Mining, Marathon Digital Holdings, Riot Blockchain, Core Scientific.
They found that only the former had an undistributed profit of $26 million, while others on this list had undistributed losses ranging from $137 million to $1.3 billion.
Core Scientific’s $1.3 billion undistributed loss is due to a negative revaluation of $788 million in goodwill from its July 2021 acquisition of BlockCap. The latter’s identifiable net assets at the time of the transaction were $142 million, while the purchase price was $1.2 billion.
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In other words, most on this list “have been losing money for years.
Experts attributed the situation to high administrative costs, failed investments in the first cryptocurrency, and overexpansion during the bull market in 2021.
Companies failed to benefit from a favorable environment last year, when bitcoin mining margins reached 1260% at their peak. Now the figure has shrunk to 85%, but it should cover operating expenses in the form of depreciation of equipment and salaries, among other things.
“This should be a warning that in some of these companies, costs may be spiraling out of control. Adopting proper risk management strategies and reducing administrative costs should get priority,” experts suggested.
As a reminder, mining company Compute North went bankrupt.