Despite the ongoing surge in the crypto market, it appears that the demand for Bitcoin application-specific integrated circuit (ASIC) miners and servers has been lackluster.
On February 27, Canaan, a leading Bitcoin ASIC manufacturer, disclosed its Q4 2023 earnings. According to the report, the company’s revenue was $49 million, which is a 16% decrease compared to the same period last year. Meanwhile, Canaan’s net loss widened to $139 million, up from $91.6 million in Q4 2022. Despite an increase in the sale of computing power and the recovery of Bitcoin’s price, Canaan stated that its ASICs were sold at lower prices compared to the market last year.
Furthermore, Canaan predicts tougher market conditions in the future. The company 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 recognized a non-cash inventory writedown of $55 million due to pricing pressures.
Bitcoin has experienced significant gains recently, with a 144.4% return over the past year. Alongside the price increase, the mining difficulty of Bitcoin (BTC) has also doubled to 81.73 trillion during the same period. Combined with persistently high electricity prices and the upcoming Bitcoin halving in April, where mining rewards will be reduced by 50%, the Bitcoin mining industry is likely to face new challenges even as the price of the coin reaches all-time highs. Canaan explains:
On February 16, Cointelegraph reported that 20% of Bitcoin miners’ hash rate could go offline after the halving due to lack of profitability. “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 come offline,” wrote analysts at Galaxy Research.
Related: Riot Platforms, other miners still see chip shortage, ESG regs as risks.