BTC processors restructuring because of COVID-19

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Digital currency processing firms are under tremendous financial pressure three months into 2020 amid the impact of the COVID-19 outbreak. This is forcing some organizations to close or restructure operations, sighting the global pandemic as one reason for their recent trouble. 

One company that has recently announced they are restructuring is Riot Blockchain, a NASDAQ-listed crypto mining company based in Colorado. To mitigate its loss, Riot announced a partnership with Coinmint that will see it shift part of its digital currency processing operations to Coinmint facilities in Massena, New York.

They will ship the fleet of ASIC rigs from its Oklahoma City facility. It includes several Bitmain Antminer S17 hardware rigs recently purchased in mid-February. Before the outbreak, Riot had announced plans to expand this facility, but those plans are now in doubt. 

The arrangement may offer Riot a pathway to avoid closure while lessening the economic impact that COVID-19 has had on its business. In the press release, Riot’s management stated this partnership would allow the company to decrease its operating costs, its impact on the environment, and increase its total hashing capacity.

The commercial agreement couldn’t come at a better time. Riot Blockchain recently submitted its annual 10-K report to the U.S. Securities and Exchange Commission (SEC). In its report, Riot warned that its operation faces harm because of the coronavirus. Riot disclosed that their ability to support the blockchain is being negatively affected by many factors, such as restrictions on its workforce and supply chain disruptions. 

Riot is not the only publicly traded digital currency processing company signaling to the market that they are facing a rough road ahead. During its latest earnings call, Canada-based Hut 8 Mining Group informed shareholders that the pandemic might cause delays in receiving delivery of new mining machines. 

“Three or four weeks ago, nobody thought these things would be an issue, and the world is grappling right now with different supply chain issues like getting ventilators and masks around the world as opposed to bitcoin mining machines,” CEO Andrew Kiguel said, according to reports.

The coronavirus concerns are only part of the story as firms are also preparing for BTC’s upcoming halving, tentatively set to occur in mid-May. While the pandemic impact is real, the forthcoming halving stands to thoroughly shake up the sector as many miners will be unable to continue operations once the block subsidiary reward is reduced by 50%. 

Will efforts such as these pay off or only prolong an inevitable exit from the blockchain infrastructure industry? 

Most experts predict that the sector will undergo a contraction. Large BTC processing operators are betting heavily that the reduced competition and subsequent consolidation of “mining farms” will offset the impact of the halving. They hope this “Last Man Standing” strategy will leave them in a position to reap a higher share of the rewards from the BTC block subsidy.  

In general, blockchain infrastructure businesses that fail to innovate often cannot last. The prerequisites for sustainability are a technical foundation that has utility, growing interest, and increasing activity. The “Last Man Standing” strategy will work in the interim, but long-term growth requires more imagination and vision. It is only possible with the Bitcoin SV blockchain.