Despite the ban on cryptocurrencies in China, major cryptocurrency miner Canaan thrives. The company recorded growth in performance throughout the year.
According to the company's financial results, released on Thursday, its gross profit for the second quarter of 2022 increased by 117 percent from the previous year. For the period, the company reported a profit of 930 million Renminbi (RMB) (US$136.6 million).
For the year's second quarter, the company reported a net income of 608 million Renminbi, which is a 149 percent increase from the same period last year. The company attributed the earnings to the foreign exchange translation adjustment.
Despite the company's impressive financial performance, company CEO Nangeng Zhang said that the second quarter was challenging due to the decline in the value of Bitcoin.
Zhang also said China's COVID-19 lockdowns affected the company's daily operations. The company also experienced significant demand for its AI chips, which it could not keep up with.
Zhang said the company had been continuously expanding its global presence. It has also been working on improving its mining equipment and power supply. As of late June, the company had a total of 346.84 Bitcoin, which equals $8.1 million.
"We are fully aware of the downward pressure from the Bitcoin price since the last fourth quarter and expect it to bring prolonged headwinds to our performance in the coming quarters," Zhang said.
"Nevertheless, we believe in the unique value of Bitcoin and its long-term prospects."
James Jin Cheng, the company's chief financial officer, echoed Zhang's remarks, saying the company expected the market environment to be more challenging due to the decrease in the price of Bitcoin. He added that various geopolitical and economic factors would also affect the business.
"As the Bitcoin price further decreased in the second quarter, we responsively lowered our product price for spot sales to shoulder the pressure with our clients," Cheng said.
"We expect the gross margin to decrease dramatically in the second half of this year."
Aside from the cryptocurrency winter, China's crypto mining companies are also facing various issues. In September 2021, China banned all cryptocurrencies, including trading and mining, forcing many firms to relocate to other countries. Before the ban, China had been taking down multiple mining facilities to reduce energy consumption.
Despite the ban on cryptocurrencies, China has continued to emerge as one of the largest Bitcoin mining regions in the world. According to Cambridge Bitcoin Electricity Consumption Index data, China currently hosts 21 percent of the global Bitcoin hash rate.
Bitcoin mining revenue soars
During the bear market in 2022, the Bitcoin mining industry experienced immense financial stress. The industry's earnings were negatively affected compared to the soaring U.S. dollar. However, miners were able to bounce back and earn a record mining revenue of nearly 70 percent on June 13.
According to data from blockchain.com, the mining revenue of Bitcoin increased significantly from July to August. It reached a record high of $23.488 million on August 12. The Bitcoin network's performance was also boosted by the increasing number of hashing transactions, which helped prevent double-spending attacks.
The positive effects of the increase in mining revenues were apparent in August. Several crypto mining companies, such as Core Scientific, Hut8 Mining, and Marathon Digital Holdings, reported that their stock prices significantly improved, trading at 95 percent higher than in June.