Bitcoin miner profitability under threat as hash rate hits new all-time high

2 years ago

The Bitcoin hash complaint deed a caller all-time precocious supra 245 EH/s connected Oct. 3, but astatine the aforesaid time, BTC miner profitability is adjacent the lowest levels connected record.

With prices successful the debased $20,000 scope and the estimated network-wide outgo of accumulation astatine $12,140, Glassnode investigation suggests “that miners are somewhat connected the cusp of acute income distress.”

Generally, difficulty, a measurement of however “difficult” it is to excavation a block, is simply a constituent of determining the accumulation outgo of mining Bitcoin. Higher trouble means further computing powerfulness is required to excavation a caller block.

Utilizing a Difficulty Regression Model, information shows a R2 coefficient of 0.944 and the past clip the exemplary flashed signs of miner distress was during BTC’s flush retired to $17,840. Currently, it hovers adjacent $18,300, which is not acold from the terms scope seen successful the past 2 weeks.

The hash complaint hitting a caller all-time precocious efficaciously means that miner margins volition beryllium further squeezed and outfits that are unprofitable tin either excavation astatine a loss, assuming that BTC’s aboriginal terms volition yet marque up for the outgo difference, oregon they tin unplug and hold until either the trouble drops oregon vigor costs improve.

With the caller emergence successful hash rate, the trouble is besides apt to emergence successful the adjacent week, with estimates pointing to a 6% to 10% adjustment.

Shown beneath are estimations of miner profitability assuming an energy complaint of $0.08 kw/h.

Depending connected a miners’ superior costs and operational costs, the nett stats supra intelligibly exemplify the tightrope immoderate miners are attempting to equilibrium connected astatine the moment.

Despite the accent connected profitability, autarkic marketplace expert Zack Voell suggested that miners with steadfast equilibrium sheets are perpetually looking for ways to grow their operations and the caller surge successful hash complaint could beryllium related to Bitmain’s newest S19 XPs coming online.

Miners who aren't broke oregon suing each different continuing to deploy what they can. Every period has a mates headlines (at slightest ) astir caller facilities being planned oregon energized. And a batch of the caller hashrate is from XPs coming online

— Zack Voell (@zackvoell) October 3, 2022

Is Bitcoin successful the clear?

What investors truly privation to cognize is whether oregon not Bitcoin terms is successful the wide oregon whether determination is an elevated hazard of different sell-off driven by miner capitulation.

According to Colin Harper, the caput of probe astatine Luxor Technologies:

"Miners are inactive selling successful the existent situation (for example, Riot sold 300 BTC past period and Bitfarms sold 544 BTC). By my estimation, we're much apt to beryllium driven little by wide selling, not miner selling particularly. If BTC terms does spell to $10,000, successful summation to much miners capitulating via BTC sales, determination would besides beryllium a batch of rigs flooding the market. We are not trying to azygous retired Riot oregon Bitfarms, these are conscionable the existent updates we have, too Hut 8, which didn't merchantability immoderate BTC.”

On the different hand, Joe Burnett, caput expert astatine Blockware Solutions, said that the bulk of miner selling has apt passed, which reduces the anticipation of different capitulation level sell-off.

Burnett told Cointelegraph:

“I deliberation the tiny miner capitulation Bitcoin experienced this summertime knocked retired immoderate anemic and overleveraged players. I bash not deliberation we volition spot different important driblet successful hash complaint without Bitcoin making caller lows beneath $17,600. It doesn't mean idiosyncratic anemic miners won't driblet disconnected this twelvemonth and next, but the caller gen rigs getting plugged successful volition apt beryllium capable to support hash complaint trending upward.”

When asked astir the surge successful hash complaint placing unit connected higher trouble adjustments and the knock-on-effect connected miner profitability, Burnett said:

“For sure. Individual anemic players whitethorn driblet disconnected and get knocked out, but it won't beryllium a important and abrupt "miner capitulation" without a driblet successful BTC price. Margins are decidedly tight.”

According to glassnode, their exemplary of “implied income accent of the Puell Multiple, with the explicit accent reflection of the Difficulty Ribbon Compression” precocious exited the portion wherever “miner capitulation is statistically likely,” suggesting that different miner driven sell-off is improbable astatine the moment.

The analysts, however, were cautious to accent that the aggregate size of Bitcoin held by miners is adjacent 78,400 and immoderate crisp downside determination successful BTC terms could trigger selling from distressed mining outlets.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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