By Frances Yue
Hello, welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch. I’ll walk you through the latest and greatest in the digital asset world this week.
Find me on Twitter at @FrancesYue_ to send feedback, or tell us what you think we should cover. You can also reach me through email to share your personal stories with crypto.
Crypto in a snap
Bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.16% gained about 5.3% over the past seven days, and was trading at around $20,131 on Thursday, according to CoinDesk data. Ether /zigman2/quotes/108573964/realtime ETHUSD +0.68% added 3.6% over the seven-day stretch to around $1,365. Meme token Dogecoin /zigman2/quotes/226077044/realtime DOGEUSD -0.17% rallied 9% while another dog-themed token, Shiba Inu /zigman2/quotes/231473891/realtime SHIBUSD +0.14% , traded 3.1% higher from seven days ago.
Crypto Metrics
| Biggest Gainers | Price | %7-day return |
| Tokenize Xchange | $10.89 | 40.5% |
| Maker | $848.63 | 16% |
| Elrond | $54.74 | 16% |
| Polygon | $0.84 | 12.8% |
| Stellar | $0.12 | 10.8% |
| Source: CoinGecko as of Oct. 6 |
| Biggest Decliners | Price | %7-day return |
| Celsius Network | $1.15 | -21.8% |
| Chiliz | $0.22 | -10% |
| IOTA | $0.27 | -8.9% |
| Synthetix Network | $2.28 | -6.9% |
| Lido DAO | $1.52 | -6.2% |
| Source: CoinGecko as of Oct. 6 |
Miners under pressure
It has been a difficult year for bitcoin miners. And there are no signs of a reversal.
Energy prices soared this year, bringing up costs for miners. U.S. electricity prices in August jumped the most since 1981, rising 15.8% year-over-year, according to the US Bureau of Labor Statistics.
Meanwhile, bitcoin prices were down almost 60% year-to-date, leading to disappointing revenue for miners.
What’s worse, bitcoin’s hashrate, or the total computational power securing the network, has reached an all-time high. That means that bitcoin’s mining difficulty, which is automatically adjusted about every two weeks based on the hashrate, will increase. According to an estimate from bitcoin mining company Braiins, on Oct. 10, miners will brace for the largest difficulty increase since May 2021.
Facing those challenges, miners on average have seen revenue fall 81% from a peak in October 2021, analysts at Arcane Research wrote in a recent note. Most public miners have seen their gross margins fall to a range of 30%-40% from an 80%-90% area, according to the Arcane analysts.
In September, Compute North, one of the largest operators of data centers for crypto miners, filed for bankruptcy in September. The company made the move “to stabilize its business and implement a comprehensive restructuring process,” a representative at Compute North wrote to MarketWatch via email.
Nasdaq-listed crypto miner Marathon Digital /zigman2/quotes/205886758/composite MARA -0.82% said Thursday it has more than $80 million of exposure in Compute North, including $10 million in convertible preferred stock of the bankrupt entity’s parent Compute North Holdings Inc. and $21.3 million related to an unsecured senior promissory note with the company.
Marathon has also paid about $50 million in operating deposits to Compute North entities.
“We’ve seen no operational changes at all,” Fred Thiel, chairman and chief executive of Marathon, said in an interview. “The bulk of it is operation-related deposits and we don’t consider those necessarily at risk,” Thiel said.
“There’s a loan to the parent company of $21 million, which pretty much makes us one of the larger unsecured creditors. And we’ll see where that shakes out in this process,” Thiel said.
Why has hashrate kept going up in a bear market?
There’s “a long lead time” on the purchase of mining machines, according to Sam Doctor, chief strategy officer at BitOoda.
That’s why in 2021, when bitcoin prices kept climbing and the Federal Reserve maintained its easy monetary policy, “a lot of miners levered up,” said Sami Kassab, analyst at Messari. “The public miners wanted to compete with others and started raising capital and equity,” noted Kassab.
In an effort to expand their operations, bitcoin miners ordered machines that are worth billions of dollars in 2021. “A lot of these purchase orders were set last year and because of supply chain issues, they’re just starting to arrive to miners now,” noted Kassab.
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