Značka: Hashrate

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

October witnessed a surge in Bitcoin’s (BTC) hash rate which is pushing the metric to a new high of 245 Exahashes per second. These changes led to a sharp decrease in the hash price, resulting in a drop in the profit margins for BTC miners reaching a low of $66.8 USD/PH (per one quadrillion hashes per second) on Oct. 24, 2022.According to Luxor Technologies, “hashprice” is the revenue BTC miners earn per unit of hash rate, which is the total computational power deployed by miners processing transactions on a proof-of-work network.Hashprice Index. Source: Hash Rate IndexNot only has volume been inconsistent, the Bitcoin hash rate increased last week to an average of 269 EH/s. This means the difficult hash rate has been rising since July 2022. Bitcoin market price vs Bitcoin difficulty. Source: Blockchain.comSeveral factors, including expansion of mining operations, which creates miner competitiveness, increased use of ASIC miners which are more efficient than their alternatives and the Ethereum Merge led to some Ethereum (ETH) mining firms to fill empty rack space from non-operating ETH GPU mining with BTC specific ASIC miners.Consequently, the surge in the hash rate resulted in an adjustment of the Bitcoin difficulty at a time when BTC’s price was dropping. As expected, after the spike of the hash rate and the increase in the Bitcoin difficulty, the hash price plummeted to $0.0657 tera hash per day, thereby reducing the level of profit. Bitcoin price versus hash rate. Source: GlassnodeIncrease in mining costs translates to compressed profitsA contributing factor to the depressed profit level is the general rise in BTC mining costs. For example, there has been a sharp increase in the price of electricity in the U.S. From July 2021 to July 2022 alone, its price increased by 25%, from $75.20 to $94.30 per megawatt hour. Energy prices also tend to increase in winter as people need to heat their homes. The Bitcoin mining industry is already seeing a rise of mining in Kazakhstan due to affordable energy. Bitcoin miners face other rising costs such as the hosting fee, acquisition of miners and installing or upgrading of the cooling systems. During the 2020 to 2021 crypto bull market, Bitcoin mining companies took out loans when BTC and equipment prices were also much higher. This means that the interest on existing debts themselves could hurt newer and overleveraged mining firms.It is clear that the increase in hash rate and Bitcoin difficulty, as well as the decrease in hash price leads to a compressed profit margins. The following graph shows a decrease in profits in a landscape where hash rate, difficulty and the cost of electricity continue to rise. Mining expansion plans for major public BTC miners. Source: TwitterIf the hash rate continues to increase amid a falling hashprice, the profit margin will continue to decrease, possibly leading some mining firms to close up shop permanently. One possible outcome is that lean (cooler balance sheets) mining firms like Marathon may be able to purchase liquidated equipment and rack space from bloated mining companies that fail. Mining firms that are staying lean while attempting to scale may prove victorious. Mining companies such as Core Scientific, Marathon, Riot, Bitfarm and CleanSpark are preparing for expansion even as many miners are finding profitability difficult. Related: Public Bitcoin miners’ hash rate is booming — but is it actually bearish for BTC price?Is sustainability the answer? In view of the difficulties discussed, BTC mining firms should adopt sustainable BTC mining models for both profitability potential and to ease regulators. This should include using renewable energy sources, increasing production capacity and installing advanced cooling systems.Mining firms can enhance their operations by using renewable energy from wind power, solar power and hydro which concurrently reduces costs and the carbon footprint. This approach can lead to more consistency and sustainability in Bitcoin mining energy costs. Norway has managed to capture 1% of all Bitcoin mining through a 100% renewable energy approach.The depressed Bitcoin price, high hash rate and Bitcoin difficulty as well as low hash price contribute to small profit margins which may lead to sustainable, decentralized mining practices across the industry.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Low hash price, soaring energy costs spell tough Q3 for Bitcoin miners

Energy problems in North America and Europe and prevailing market conditions have spelled another bleak quarter for Bitcoin (BTC) mining operators on both continents.The latest Q3 mining report from Hashrate Index has highlighted several factors that have led to a significantly lower hash price and higher cost to produce 1 BTC.Hash price is the measurement used by the industry to determine the market value per unit of hashing power. This is measured by dividing the dollar per terahash per second per day and is influenced by changes in mining difficulty and the price of BTC. As Hashrate Index reports, Bitcoin’s hash price was afforded some reprieve in the middle of Q3 as heat waves during the American summer led to a drop in hashrate, which corresponded with a slight BTC price recovery. However the price of Bitcoin dropped below $20,000 once again and hashrates climbed to new all time highs in September, leading to the hash price slipping closer to all-time lows.Miner profit margins were further threatened by rising energy costs in North America and Europe. The latter has been particularly hard hit by a ‘combination of mis-managed renewable energy policies, under investment in oil and gas, nuclear plant decomissionings, and Russia’s war with Ukraine’ which have sent energy prices sky-high.Related: Top 3 reasons why Bitcoin hash rate continues to attain new all-time highsAmerican miners have had to contend with the average cost of industrial electricity increasing 25% from $75.20 a megawatt hour to $94.30 per megawatt hour from July 2021 to July 2022. This has also had an effect on hosting service providers that are increasing their power prices in hosting contracts.As hash price has dropped, some mining operators with mid-range equipment are facing down reaching breakeven costs margins. In the past, retail miners have either abandoned or sold rigs that are no longer profitable to mine. Liquidating these assets is also becoming more difficult as Bitcoin mining values have been in decline throughout 2022. Rig prices dropped significantly in May and June but ‘flattened’ in August and September according to the report, while the picture is still bleak:“Old-gen machines like the S9 experienced a precipitous drawdown at the end of June amid Bitcoin’s freefall to $17.5k. With mining economics in the dumpster, the S9 and similar rigs have become unviable except in the cheapest energy markets.”Publicly-traded mining firms have also faced increasing pressure with increasing interest rates and greater difficulty acquiring lines of credit. This has led to some firms turning to equity fundraising, which has the downside of diluting shareholders at lower stock prices. However these at-the-market offerings allow for quick capital raises which can help fund continued expansion and operating costs through the ongoing bear market. Miners have also had to sell BTC holdings in order to keep production going in 2022. However this rate has ‘slowed progressively’ through the third quarter and public miners have sold fewer BTC than their monthly production in August and September for the first time since May.Hashrate Index also cautioned that Q3 could be a precursor for more tough times for the mining industry with the potential for further distressed asset sales, bankruptcies and miner capitulation as the year comes to a close.

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Further BTC mining consolidation as Crusoe acquires peer mining firm

Amid soaring Bitcoin (BTC) mining difficulty and sinking mining profitability, Colorado-based Bitcoin miner Crusoe Energy Systems has announced the acquisition of the operating assets of portable BTC mining operator Great American Mining (GAM).The deal will see GAM’s operations integrate into Crusoe’s, adding over 10 megawatts (MW) to its mining output and around 4,000 application-specific integrated circuit (ASIC) crypto mining rigs — increasing Crusoe’s capacity by about 9%, according to the company.GAM builds and deploys portable BTC mining facilities — vehicle trailer-mounted containers enclosed with ASIC miners — with the goal of helping oil and gas companies take advantage of stranded or otherwise wasted natural gas by using it to power the facility to mine BTC.Crusoe will have roughly 125 of these gas-powered waste containers deployed and operating following the acquisition, which it says could reduce an annual CO2-equivalent emission of around 170,000 cars.The consolidation of these two mining operations comes as the sector faces pressure from both the traditional and crypto markets, along with an all-time high BTC mining difficulty, all of which is negatively affecting miner profitability.Markus Thielen, head of research and strategy for digital asset services platform Matrixport, told Cointelegraph the majority of the mining hash rate moving to the United States over the last two years had “significant consequences” on how the industry was positioned into the wider economic downturn.“Around 20 Bitcoin mining companies raised additional capital through IPOs where shareholders demanded a high correlation to the underlying Bitcoin price,” he said, explaining orders for new mining machines were placed a year in advance, which was expected to come online in the third quarter of 2022:“The result was that mining companies bought Bitcoin directly from the market at higher costs than their mining operations and were negatively exposed to further capital expenditure investments as they placed equipment orders a year in advance.”As miners waited for the equipment, some sold significant parts of their BTC reserves to recoup expenditures, but Thielen says “this has not been enough,” and expects an “outright industry restructuring.”Related: Canaan exec says opportunity outweighs crisis as Bitcoin miners struggle with shrinking profitsCrypto miners such as CleanSpark have already shown to be interested in snapping up cheap assets amid tough market conditions, purchasing over 1,000 ASIC mining rigs at a “substantially discounted price” in July and 1,800 Antminer S19 XP rigs the month prior.In September, CleanSpark went on to purchase a $33 million facility in the United States from Australian-based miner Mawson, spending an extra $9.5 million buying the firms’ 6,468 ASIC mining rigs.Rising energy costs and the crypto bear market caused mining hosting firm Compute North to file for Chapter 11 bankruptcy in September, with the company owing $500 million to 200 creditors with assets worth anywhere between $100 million and $500 million.

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Further BTC mining consolidation as Crusoe acquires peer mining firm

Amid soaring Bitcoin (BTC) mining difficulty and sinking mining profitability, Colorado-based Bitcoin miner Crusoe Energy Systems has announced the acquisition of the operating assets of portable BTC mining operator Great American Mining (GAM).The deal will see GAM’s operations integrate into Crusoe’s, adding over 10 megawatts (MW) to its mining output and around 4,000 application-specific integrated circuit (ASIC) crypto mining rigs — increasing Crusoe’s capacity by about 9%, according to the company.GAM builds and deploys portable BTC mining facilities — vehicle trailer-mounted containers enclosed with ASIC miners — with the goal of helping oil and gas companies take advantage of stranded or otherwise wasted natural gas by using it to power the facility to mine BTC.Crusoe will have roughly 125 of these gas-powered waste containers deployed and operating following the acquisition, which it says could reduce an annual CO2-equivalent emission of around 170,000 cars.The consolidation of these two mining operations comes as the sector faces pressure from both the traditional and crypto markets, along with an all-time high BTC mining difficulty, all of which is negatively affecting miner profitability.Markus Thielen, head of research and strategy for digital asset services platform Matrixport, told Cointelegraph the majority of the mining hash rate moving to the United States over the last two years had “significant consequences” on how the industry was positioned into the wider economic downturn.“Around 20 Bitcoin mining companies raised additional capital through IPOs where shareholders demanded a high correlation to the underlying Bitcoin price,” he said, explaining orders for new mining machines were placed a year in advance, which was expected to come online in the third quarter of 2022:“The result was that mining companies bought Bitcoin directly from the market at higher costs than their mining operations and were negatively exposed to further capital expenditure investments as they placed equipment orders a year in advance.”As miners waited for the equipment, some sold significant parts of their BTC reserves to recoup expenditures, but Thielen says “this has not been enough,” and expects an “outright industry restructuring.”Related: Canaan exec says opportunity outweighs crisis as Bitcoin miners struggle with shrinking profitsCrypto miners such as CleanSpark have already shown to be interested in snapping up cheap assets amid tough market conditions, purchasing over 1,000 ASIC mining rigs at a “substantially discounted price” in July and 1,800 Antminer S19 XP rigs the month prior.In September, CleanSpark went on to purchase a $33 million facility in the United States from Australian-based miner Mawson, spending an extra $9.5 million buying the firms’ 6,468 ASIC mining rigs.Rising energy costs and the crypto bear market caused mining hosting firm Compute North to file for Chapter 11 bankruptcy in September, with the company owing $500 million to 200 creditors with assets worth anywhere between $100 million and $500 million.

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