Bitcoin miners are having a tough time this year as the energy price crisis is eating into their profits while hashrate and difficulty continue to rise.
In its third quarter report published on 19 October, bitcoin mining portal Hashrate Index revealed the extent to which miners were suffering during the recession.
Hashprice, which is a measure of the market price specified in dollars per terahash per day ($/TH/s/d) per unit of hashing power, has fallen 83.5% from the same time last year.
The index, which measures the metric over time, reports that hashprice, also known as mining profitability, has fallen from $0.412/TH/day in October 2021 to $0.068 today.
Disadvantages of rising energy prices
The report noted that during the third quarter, public mining firms “continued to fund mining rigs and BTC operations and repay debt.” It said the sale of distressed assets began, and the first major mining bankruptcy occurred. Compute North, the second largest BTC mining hosting provider in the US, filed for bankruptcy in September.
The decline in profitability has been directly attributed to rising energy prices and falling BTC prices.
The report showed that the average cost of industrial electricity in the United States increased 25% from $75 per MW to $94 per MW from July 2021 to July 2022. Some states, such as Texas and Georgia, saw a sharp increase of around 65% over this period.
Bitcoin mining researcher Jaran Melrud compared the cost of producing one BTC in Texas a year ago to today.
The report states that most hosting providers in the US are “working against the break-even threshold”. This appears to be true, even for new generation mining hardware like the Bitmain Antminer S19j Pro.
Cash-strapped miners continued to liquidate bitcoin during the third quarter, although sales slowed towards the end of the period. For the first time since May, public miners sold less BTC than their monthly output in both August and September, it said.
Bitcoin mining hashrate and difficulty peak
These lightning problems are compounded by the recent all-time highs in network hash rate and difficulty. This makes it mathematically difficult to mine the next block.
According to BitInfoCharts, the average hash rate (often referred to as network horsepower) is 271.5 exhash per second (EH/s). This is an increase of 66.5% over the same period last year. It reached an all-time high of 295 EH/s on 11 October.
The difficulty metric, which measures the competition among miners to solve the next block in the network, is also at an all-time high of 35.6T. Both metrics, when at high levels, make it very difficult for companies and mining pools alike to mine bitcoin.
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