(Bloomberg) -- Bitcoin’s new year rally is resuscitating many crypto-mining companies seeking to escape from near financial ruin after one of the most devastating quarters ever for the nascent industry. Whether they succeed in making a comeback remains in question.

High electricity costs, a plunge in digital assets prices and persistent network competition in the fourth quarter slashed mining profit margins and made it difficult for miners to stay afloat. Core Scientific Inc., the largest public Bitcoin mining company by computing power, went bankrupt and multiple major miners warned of liquidity crunches. While struggling miners have garnered some relief from Bitcoin’s 40% rebound this year, they are still under financial pressure.  

The rise in Bitcoin has made it easier for miners to raise capital from the equity market after debt-financing opportunities dried up and interest payments outpaced cash flows in the quarter. Miners such as Marathon Digital Holdings Inc. and Riot Platforms Inc. have been among the best performing US stocks this year, gaining more than 75% each after tumbling in value in 2022. 

“Public market investors are not typically those that look at hash price and mining machines,” said Ethan Vera, chief operations officer at crypto-mining services firm Luxor Technologies, referencing industry terms used to calculate miners’ revenue. “Their investing is based on the price of Bitcoin.”   

Marathon canceled the release of fourth-quarter results Tuesday after saying there had been “accounting errors” in several quarters of its financial statements. The US Securities and Exchange Commission raised questions about how the miner recognized the impairment of digital assets and revenue.

In the most recent quarter, Greenidge Generation Holdings Inc. was able to push back a deadline to repay an $11 million debt with investment bank B. Riley, which was allowed to purchase shares at a discount in late January. Terawulf Inc., which has been supported by celebrities such as Gwyneth Paltrow and Mindy Kaling, was able to defer amortization after raising $32 million from equity proceeds in February. Even bankrupt Core Scientific received a court approval to refinance its loan so that it can keep operating. Mining equipment and Bitcoin sales have also helped miners to deleverage and restructure debt.

Even with the multiple restructurings of obligations, many miners are still facing major financial woes as the US heads into warmer weather, said Matthew Kimmell, digital asset analyst at crypto research firm CoinShares. 

Bitcoin mining is an energy-intensive process, in which miners use hundreds of thousands of powerful specialized computers to secure the Bitcoin blockchain and earn rewards in the form of the token. As heat waves hit crypto-mining hubs such as Texas in the past, electricity costs tended to skyrocket. Almost all large-scale miners in the state shut down during a historic heat wave last July. 

Miners may be even more vulnerable to the swings in electricity prices this summer as most of them don’t have the capital to post enough collateral for power purchase agreements, in which buyers can lock in a certain electricity price through a period of time.

“Most miners are just benefiting from lower energy costs today and keep their fingers crossed hoping the price won’t come back hurting them too much in the future.” Vera said. 

A persistent high level of network competition is also keeping mining revenue low even if Bitcoin prices go up. The mining difficulty or hash rate, a measure of computing power to mine Bitcoin, has been breaking records since late 2022. Miners compete for a limited supply of Bitcoin rewards released from the blockchain. Better-capitalized miners have continued their operations, waiting for others to drop out. 

Miners still face a rising hash rate as they bring more machines online and Bitcoin prices remain fairly muted, Kimmell said. “It is still a trying time for miners,” he said. 

Winter storms across North America in the quarter not only forced most miners in the region to shut down with soaring electricity costs, but caused damages on their machines. Riot Platforms, which has one of the largest operating mining facilities in Texas, disclosed a chunk of its mining machines were still offline due to the winter storms in December. 

“Most institutional investors are still pretty skittish, but if we were to go on a rally here, significant upward pressure, that opens up the equity market to these miners.” Vera said.

(Adds Marathon’s disclosure of accounting errors in the fifth paragraph.)

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