Bitcoin mining difficulty continues to rise, reaching an all-time high in early August amid a collapse in cryptocurrency markets.
As a result, miner profitability continues to fall as BTC mining hardware falls below the break-even point.
Bitcoin Miners Capitulate as Mining Difficulty Rise
Galaxy’s head of research Alex Thorne recently noted the 24th-largest increase in Bitcoin mining difficulty since 2016. According to f2pool, at the current Bitcoin price of $52,982, BTC’s mining difficulty is 90.67 hashrate.
“Today Bitcoin fell to $52,300. According to f2pool, when Bitcoin fell to $52,000, only the Antminer S21 Hyd and S21, Avalon A1466I, Antminer S19XP Hyd and S19XP were profitable. At $0.07/kWh, most Bitcoin mining machines fell below the breakeven point,” WuBlockchain reports.
The data shows that only a few miners remain profitable, and most Bitcoin mining machines fall below the breakeven point. The f2pool tool concludes that all Bitcoin ASICs (specialized computers, machines, or generators for Bitcoin mining) with a specific power consumption of 23 W/T or higher are operating at a loss.
Read more: Bitcoin Mining from Home: Is It Possible in 2024?
This means that the cost of electricity and resources required to mine Bitcoin exceeds the rewards received from mining. This situation can be difficult 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 equipment or cutting costs.
Some miners may even temporarily shut down operations until market conditions improve. Indeed, this is already happening, as blockchain.com data shows mining hashrate falling as Bitcoin declines.
“One of the risks for miners is still the low level of fees, so mining profitability is currently too dependent on the price of Bitcoin,” Julio Moreno, head of research at Cryptoquant, told BeInCrypto.
Miners operating at a loss could potentially impact the overall supply of Bitcoin. In addition to miners ceasing operations due to unprofitability, other factors could include network outages, regulatory changes, or natural disasters that impact mining capacity. If a significant number of miners curtail their operations or exit the market, this could lead to a decrease in the supply of new Bitcoin.
“It looks like we’re finally getting a true bear market in Bitcoin mining, where the cost of production exceeds the selling price until businesses go bankrupt and consolidation occurs to reduce costs. Remember kids, without natural predators, nature balances populations through starvation,” Deso Games wrote.
Mining stocks fall amid market weakness
TradingView data shows that shares of U.S. crypto miners are also falling, reflecting Bitcoin’s weakness. Riot Platforms Inc. (RIOT) is down 10%, sending its share price to $8.57. MARA, formerly Marathon Digital, is also falling, as are Cipher Mining and Hut.
Other cryptocurrency stocks, including Coinbase and Microstrategy, are also suffering. The sell-off has seen the global cryptocurrency market cap fall by 13.75%.
Bitcoin and major altcoins continue to suffer losses due to concerns over macroeconomic factors related to Japanese stocks and geopolitical tensions between Iran and Israel. Other oversupply disrupting the Bitcoin market include the German government’s recent sale of 50,000 BTC and distributions from the bankrupt Genesis Trading. There’s also a looming sale by the US government, causing markets to cry “Black Monday.”
“Markets have crashed on what is known as ‘Black Monday.’ New fears of World War III are rising, markets have seen their worst days in 40 years, and over $1,000,000,000 in crypto has been liquidated in the last 24 hours,” said Kyle Chasse.
Read more: What Causes Bitcoin Volatility?
While these factors have left markets wary, analysts see a potential market bottom, making the decline a good buying opportunity.
