New data has revealed that Bitcoin (BTC) mining may no longer be as lucrative as it used to be. Bloomberg has reported that the profitability of Bitcoin mining is approaching record lows not seen since the days following the collapse of FTX, posing significant challenges to those securing the network.
The data indicates that the “hash price,” a metric that measures the earnings a miner earns daily for each petahash of computing power, has dipped alarmingly close to its all-time low.
This decline is notable given that it came after the recent Bitcoin halving event on April 20, which traditionally boosted the cryptocurrency’s value, but this time failed to counter bearish pressure from global economic uncertainty.
In particular, the term “hashprice”, coined by Luxor Technologies, reflects the ‘harsh’ realities faced by miners after the Halving. The event, which takes place every four years, cuts the block reward to miners in half, aiming to maintain a deflationary schedule for Bitcoin’s issuance.
Understanding Bitcoin Hashprice Dynamics
On April 20, immediately after the halving, the hash price for BItocin rose to $139, but this was short-lived. The increase was primarily due to increased transaction fees related to the Rune Protocol’s activities on Bitcoin’s blockchain.
However, as these fees normalized and mining problems increased, hash price values ​​fell to $57, perilously close to the November 2022 low of $55. This value represents miners’ sharp drop in profitability, forcing them to be more dependent on transaction fees and the potential appreciation of Bitcoin’s price.
Declining mining profitability also signals tough times ahead, especially for smaller mining operations.
According to Bloomberg, major mining companies such as Marathon Digital Holdings Inc. and Riot Platforms Inc. proactively invested in extensive mining infrastructure and advanced equipment to withstand the profitability crisis.
Conversely, smaller entities may struggle to remain viable in an industry that is becoming increasingly competitive and capital intensive.
Marathon Digital’s strategic expansion
In response to the challenging environment, Marathon Digital has raised its hash rate growth target for 2024, aiming to align with the new mining reward of 3,125 BTC post-halving.
The company started the year with a hash rate capacity of 24.7 exahashes per second and projected a 46% increase. After strategic acquisitions and increased equipment orders, Marathon expects to reach a hashrate of 50 EH/s by the end of the year.
Fred Thiel, Marathon’s chairman and CEO, expressed confidence in meeting these growth goals without additional capital injection, citing the firm’s solid cash position. Thiel noted:
Given the amount of capacity we have available following our recent acquisition and the amount of hashrate we have access to through current machine orders and options, we now believe it is possible for us to double the scale of Marathon mining in 2024 and achieve 50 exahash before the end of the year.
The company’s advances in mining technology and efficiency also aim to achieve an operational efficiency of 21 joules per minute. terahash, further strengthening its foothold as a leader in the sector.
Featured image from Unsplash, chart from TradingView
