Home » Sub-$20K Bitcoin price puts BTC miner profits under pressure as hash rate soars

Sub-$20K Bitcoin price puts BTC miner profits under pressure as hash rate soars

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In October, Bitcoin’s hash rate surged, pushing the metric to a new high of 245 exahashes per second. These changes caused hash prices to plummet and Bitcoin’s profit margins to drop (Bitcoin) is minor, reaching a low of $66.8 per petahash on Oct. 24.

According to Luxor Technologies, the “hash price” is the revenue a BTC miner earns per unit. hash ratewhich is the total computing power deployed by miners processing transactions on the Proof of Work network.

Bitcoin hash price index.Source: Luxor Technologies

Not only is the volume inconsistent, Bitcoin hash rate rises Last week averaged 269 EH/s. This means that from July 2022 onwards, network difficulty will increase.

Bitcoin market price and Bitcoin difficulty. Source: Blockchain.com

Expansion of mining business that creates competitiveness for miners. Increased use of ASIC miners that are more efficient than alternatives. And with the Ethereum merger, some Ethereum mining companies started filling empty rack space with inactive Ether (ethereum) GPU miner with BTC-specific ASIC miner.

As a result, the hashrate surge has caused bitcoin difficulty to adjust while the bitcoin price is falling. It plummeted to $0.0657 per Terahash, thereby lowering the profit level.

Bitcoin price and hashrate. sauce: glass node

Increased mining costs lead to lower profits

Part of the reason for the drop in profit levels is the general rise in BTC mining costs. For example, the price of electricity has increased significantly in the United States. From July 2021 to July 2022 only, the electricity price gain 25% reduction from $75.20 to $94.30 per MWh. Energy prices also tend to rise in winter as people need to heat their homes. The Bitcoin mining industry is already seeing an increase in mining. Kazakhstan with affordable energy.

Faced by Bitcoin Miners Other cost increasesHosting fees, earning miners, installing or upgrading cooling systems, etc. During the cryptocurrency bull market of 2020-2021, Bitcoin mining companies made loans when the price of Bitcoin and equipment was much higher. Damage new and over-leveraged mining companies.

It is clear that rising hash rates and Bitcoin difficulty, as well as lower hash prices, are leading to compressed profit margins. The graph below shows the decline in profits in a landscape where hashrate, difficulty, and electricity costs continue to rise.

Mining expansion plans for major public BTC miners.Source: Luxor

If hashrates continue to rise while hash prices fall, profit margins will continue to decline and perhaps some Mining company permanently closes shop.

One possible outcome is that lean mining companies (with cooler balance sheets) like Marathon may be able to buy liquidated equipment and rack space from bloated failed mining companies. That’s it.

A mining company that stays lean while trying to scale is likely to emerge victorious. Mining companies such as Core Scientific, Marathon, Riot, Bitfarm and CleanSpark are preparing to expand even as many miners struggle to be profitable.

Related: Public Bitcoin Miner Hash Rates Soar, But Is Bitcoin Really Bearish?

Is sustainability the answer?

In view of the difficulties discussed, the BTC mining company Adopt a sustainable BTC mining model Both for potential profitability and deregulation. This should include using renewable energy sources, increasing production capacity and installing advanced cooling systems.

Mining companies can use renewable energy such as wind, solar and hydropower to enhance their operations while reducing costs and carbon footprint. This approach makes the energy cost of Bitcoin mining more consistent and sustainable.Norway succeeded in capturing 1% of all Bitcoin mining powered by 100% renewable energy approach.

Falling Bitcoin price, high hash rate, low Bitcoin difficulty and low hash price are leading to lower profit margins, leading to sustainable and decentralized mining practices across the industry. may be connected.