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CoinFactiva Investigates the Crypto Mining Boom: Understanding Record Profits, Marathon Digital, Market Dynamics, and Investment Caution

Miners’ record profits don’t warrant stock purchases.

The first quarter of 2024 has proven to be phenomenal in terms of earnings for several public miners. For instance, Riot Platforms reported a record net profit of $211.78M, marking a 249% increase compared to the previous quarter.

Meanwhile, Marathon Digital, which emerged as the top miner in power among public miners last year, has been officially included in the S&P SmallCap 600 index. This index tracks companies with a market capitalization ranging from $1 billion to $7 billion, with Marathon being the first among its peers to receive this honor.

Its market capitalization is $4.85 billion according to tradingview.com or $4.68 billion according to Companiesmarketcap.com, with a net profit in the first quarter expected to be around $200 million.

However, the arms race continues at a brisk pace, and competition is intensifying. Riot plans to nearly triple its computing power this year, aiming to reach 31.5 EH/s, and by 2027, to achieve 100 EH/s.

Firstly, miners’ optimism is tied to Bitcoin’s dynamics. Most of them include a forecasted increase in the cryptocurrency’s value to $100-150 thousand in their projections for the next two years. Secondly, miners have high hopes for the spread of network side products, such as ordinals and runes, the frenzy surrounding which in April led to an explosive growth in transaction fee revenues. On the halving day, block fill revenue more than tripled the revenue from mining, setting an absolute record.

However, after the halving, the price stalled, and interest in quasi-tokens waned. Network fees returned to minimal levels, depriving miners of a promising source of income. The halving also halved the revenue miners received from block mining. As the new reality proved too harsh for some of them, part of the equipment was shut down. The network hash rate dropped from a record 691 EH/s to the current 582 EH/s.

The reduction in total computing power will lead to a record difficulty adjustment since December 2022, with an estimated decrease of approximately 0.51% 23.05.2024.

The first quarter of 2024 has been successful for miners mainly due to the emergence of spot ETFs, driving Bitcoin’s growth by 66% in the reporting period. However, the second quarter could be a time of trials amidst significant revenue declines.

Mining companies are currently reporting record profits, and stocks are soaring on the news. However, now is not the best time to invest in the cryptocurrency mining industry.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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