Despite the ongoing surge in the crypto market, it seems that there is not much demand for Bitcoin application-specific integrated circuit (ASIC) miners and servers.
On February 27, Canaan, a Bitcoin ASIC manufacturer, released its Q4 2023 earnings report. The report revealed that the company generated $49 million in revenue, which is a 16% decrease compared to the same period last year. Additionally, Canaan reported a net loss of $139 million, a significant increase from the $91.6 million loss in Q4 2022. Despite selling more computing power and experiencing a Bitcoin price recovery, Canaan stated that its ASICs were sold at lower prices compared to the previous year’s market rates.
Furthermore, the company anticipates even more challenging market conditions in the future. Canaan stated, “For the first quarter of 2024 and the second quarter of 2024, the Company expects total revenues to be approximately US$33 million and US$70 million, respectively, considering the challenging market conditions across the industry.” During the quarter, Canaan also had to write off $55 million worth of inventory due to pricing pressures.
Bitcoin has witnessed impressive gains recently, with a 144.4% return over the past year. Alongside the price surge, the mining difficulty of BTC has also doubled to 81.73 trillion during the same period. This, coupled with consistently high electricity prices and the upcoming Bitcoin halving in April, which will cut mining rewards by 50%, suggests that the Bitcoin mining industry will face new challenges despite the coin’s price reaching all-time highs. Canaan acknowledges this by stating:
“On February 16, Cointelegraph reported that approximately 20% of Bitcoin miners’ hash rate could go offline after the halving due to lack of profitability. Analysts at Galaxy Research wrote, “Given how sensitive the breakevens are for the various ASIC models to Bitcoin price and transaction fees as a percent of rewards, we estimate that between 15 – 20% of network hash rate coming from the ASIC models could go offline.”
Related: Riot Platforms and other miners continue to view chip shortages and ESG regulations as risks.