Bitcoin Miners Struggle as Production Costs Rise

Bitcoin miners are facing significant challenges due to rising production costs, making it tough to turn a profit. The cost of mining Bitcoin is currently around or below the average production cost, forcing many miners to shut down unprofitable machines. At the start of June, the average cost of mining one Bitcoin was $83,668, according to MacroMicro data, but it fell slightly to about $72,000 by July 2. This high cost has made it difficult for many miners to stay profitable, especially since Bitcoin prices are close to these production costs.

James Butterfill from CoinShares shared data showing Bitcoin prices were near the average production cost during the April halving event. Half of the 14 miners studied, including Bit Digital and Riot Platforms, had costs above average, while Tether-backed Bitdeer and Hut8 had lower costs.

F2Pool, a Bitcoin mining pool operator, confirmed that only ASIC machines with over 23 W/T efficiency were profitable as of July 4. Machines like Antminer S21 Hydro and Avalon A1466I were among the few making profits, with break-even Bitcoin prices at $39,581 and $48,240, respectively. Other machines needed Bitcoin prices above $51,456 to be profitable.

Bitcoin mining difficulty dropped significantly on July 5, one of the biggest declines since the FTX collapse. F2Pool said this could make more machines profitable. They estimated that at a Bitcoin price of $54,000, ASICs with unit power of 26 W/T or less would be profitable, assuming energy costs of $0.07 per kWh.

Recent reports indicated that Bitcoin miners were nearing capitulation levels last seen during the FTX collapse. As a result, miners turned off unprofitable machines and sold about 30,000 BTC, valued at $2 billion, last month. Con Kolivas from Solo CKPool explained that miners below their profit points are decommissioning inefficient machines or leaving the industry. Many miners held on longer than expected, hoping for a significant Bitcoin price increase to cover their costs.

“All the miners operating well below their profit points are finally decommissioning their inefficient machines or exiting the industry entirely. Presumably, many held on for much longer than expected because they anticipated a significant price rise in Bitcoin that more than compensated,” Kolivas said.

The Bitcoin mining industry is facing severe profitability challenges due to high production costs and volatile Bitcoin prices. Many miners are shutting down unprofitable machines or exiting the industry. A recent drop in mining difficulty offers some hope, but the overall situation remains difficult. The volatility and high costs of Bitcoin mining make it a challenging business even for established miners.

As the industry adapts to these pressures, the future profitability of Bitcoin mining will depend on market conditions and miners' decisions. Monitoring mining difficulty and Bitcoin prices will be crucial in the coming months.