Bitcoin mining difficulty continues to increase, reaching an all-time high in early August as crypto markets crashed.
In the aftermath, the profitability of miners continues to suffer as BTC mining machines fall below their break-even point.
Bitcoin Miners Capitulate as Mining Difficulty Soars
Head of Research at Galaxy Alex Thorn recently highlighted the 24th biggest increase in Bitcoin mining difficulty since 2016. According to f2pool, at Bitcoin’s current price of $52,982, BTC mining difficulty is at a 90.67 hashrate.
“Today, Bitcoin has dropped to as low as $52,300. According to f2pool, when Bitcoin dropped to $52,000, only Antminer S21 Hyd and S21, Avalon A1466I, Antminer S19XP Hyd and S19XP were profitable. At $0.07/kWh, most Bitcoin mining machines have fallen below the break-even point,” WuBlockchain reported.
Data shows only a handful of miners remain profitable, with most Bitcoin mining machines falling below the break-even point. The f2pool tool summarizes that all Bitcoin ASICs (specialized Bitcoin mining computers, machines, or generators) with a unit power consumption of 23 W/T or higher are operating at a loss.
This means that the cost of electricity and resources required to mine Bitcoin outweighs the rewards earned from mining. This situation can be challenging for Bitcoin miners as it puts pressure on their sustainability. To remain competitive, miners may have to make operational adjustments, such as upgrading to more efficient mining machines or reducing costs.
Some miners may even temporarily shut down operations until market conditions improve. Indeed, this is already happening as blockchain.com data shows nosediving mining hashrate as Bitcoin slides lower.
“One still risk for miners is that fees remain depressed, so mining profitability is currently too much dependent on the price of Bitcoin,” Julio Moreno, Head of Research at Cryptoquant, told BeInCrypto.
Bitcoin Mining Hashrate. Source: Blockchain.com
Miners operating at a loss can potentially affect the overall supply of Bitcoin. In addition to miners shutting down their operations due to unprofitability, other drivers could be network disruptions, regulatory changes, or natural disasters affecting mining facilities. If a significant number of miners reduce their operations or exit the market, it could decrease the supply of newly minted Bitcoins.
“Finally looking like we get a real bitcoin mining bear market, where cost of production exceeds sales price until businesses go bust and there is consolidation to reduce costs. Remember kids, without natural predators, nature balances populations out through starvation,” Deso Games wrote.
Mining Stocks Sink Amid Market Weakness
TradingView data shows that US crypto mining stocks are also sinking, mirroring Bitcoin’s weakness. Riot Platforms Inc. (RIOT) has seen a 10% decrease, bringing its share price down to $8.57. MARA, formerly Marathon Digital, is also sinking, as are Cipher Mining and Hut.
Other crypto-related stocks, including Coinbase and Microstrategy, are also suffering. Amid the sell-off, the global crypto market capitalization is down 13.75%.
Mining Stocks Sinking. Source: TradingView
Bitcoin and major altcoins continue to see losses due to concerns about macroeconomic factors relating to Japanese stocks and geopolitical tension between Iran and Israel. Other supply overhangs disrupting the Bitcoin market include the German government’s recent sale of 50,000 BTC and distributions from the bankrupt Genesis Trading. There is also an impending sale from the US government, causing markets to cry “Black Monday.”
“Markets Crash In What Is Being Called “Black Monday.” New fears of World War 3 are escalating, markets have had their worst days in 40 years, and more than $1,000,000,000 has been liquidated from crypto in the past 24 hours,” Kyle Chasse noted.
While these factors have markets on alert, analysts see a potential market bottom, which would render the dip a good buy opportunity.