Even though the prolonged period of cryptocurrency winter is behind us, digital asset market companies still feel its adverse effects. The consolidation of Bitcoin (BTC) and other asset prices, low network activity, and increasing mining difficulty make it challenging for both miners and cryptocurrency funds to achieve profitability. The latest examples are publicly listed companies Riot Platforms Inc. (NASDAQ: RIOT) and Galaxy Digital Holdings Ltd. (TSX: GLXY), which reported negative financial results in the second quarter.
Galaxy Digital Loses $46 Million in Q2 2023
Founded by American investor Michael Novogratz, the cryptocurrency firm Galaxy Digital lost $46 million in the past quarter. This is a significant contrast compared to the profit of $134.3 million reported in the previous quarter.
“Compared to the first quarter, the decrease was primarily attributable to lower net realized gains on digital assets and net unrealized losses on investments, partially offset by higher net realized gains on investments,” the company explained in the official statement.
Trading profits decreased 54% quarter-over-quarter (QoQ) to $565 million. However, the company began seeking profits elsewhere, including in the asset management industry. Galaxy Asset Management achieved revenue of $33.8 million, representing an increase of 619% QoQ. Mining profits, operated by Galaxy Digital Infrastructure Solutions, grew 51% QoQ to $15.4 million.
"Galaxy's operating businesses performed well in the second quarter against a backdrop of continued uncertainty and regulatory pressure, as we continue to manage the Company to meet the evolving needs of our clients," Michael Novogratz, the Founder and CEO of Galaxy, said.
The company also reported maintaining a “strong liquidity position” of $696 million, consisting of $302 million in cash and $395 million in digital assets. Of the latter, stablecoins constituted $167 million.
Riot Blockchain Lost $27.7 Million in the Same Quarter
Turning to the publicly listed cryptocurrency miner, Riot Blockchain, the company reported Q2 2023 revenue of $76.7 million and achieved a record hash rate capacity of 10.7 EH/s. However, it was not enough to achieve profitability, with a net loss of $27.7 million for the three-month period. Compared to the loss a year earlier, this is a significantly improved result. In Q2 2022, Riot reported a loss of $353.6 million.
In the official statement, the company seems to focus mainly on the increasing hash rate capacity and expanding the execution of the power strategy. This led to a decrease in the average cost of mining a single Bitcoin to $8,389, compared to an average Bitcoin price of $28,000 during the period.
“I am excited to announce second-quarter 2023 results for Riot, as this quarter showcased ongoing execution of our long-term strategy and included a number of landmark announcements solidifying our future growth path,” Jason Les, the CEO of Riot, commented. “Riot’s core business is Bitcoin mining, and the scale of our vertically integrated operations and financial strength allowed us to execute on our power strategy at unmatched scale this quarter.”
The total revenue reached $76.7 million, which is up from $72.9 million during the corresponding three months in 2022. This surge was largely due to a boost of 27% in Bitcoin production compared to the same period last year, despite a drop in average Bitcoin prices.
Regarding production, the quarter saw 1,775 Bitcoins being mined, a significant increase from the 1,395 Bitcoins that were mined in the same quarter of 2022. This enhanced production is attributed to a considerable increase in the number of miners deployed compared to the previous year.
In the last month of the second quarter, several other publicly listed cryptocurrency companies reported declines in production. These include Argo Blockchain, which saw a drop of nearly 20% in efficiency, and HIVE Blockchain, which produced 259 BTC compared to a record 304.6 BTC the year before.
After the start of 2023, it seemed this year would be better for the industry than the very weak 2022, during which miners earned $6 billion less than the previous year. However, the dynamic growth of cryptocurrencies halted during the summer, and we are now witnessing market stagnation again.
