• Bitcoin mining profitability has significantly declined since the recent halving, with the hashprice dropping to historic lows due to reduced block rewards and falling Bitcoin prices.
  • Miners are scaling back operations and diversifying into alternative cryptocurrencies like Kaspa to mitigate losses.

The Difficulties of Bitcoin Mining

Bitcoin mining has become more cost-intensive than ever since the recent halving event, with miners witnessing a dramatic decrease in profitability. According to Hashrate Index data, the “hashprice”—a metric indicating the earnings per unit of energized hashrate—has plummeted to unprecedented lows over the past two months.

On April 19, the day of the Bitcoin halving, the hashprice stood at $92.20 per petahash per second (PH/s) per day. However, within just a week, this figure dropped to $57.53, and by May 1, it had further declined to an all-time low of $44.76. The hashprice metric, expressed in USD/PH/Day, essentially measures the daily earnings miners receive for each unit of their energized hashrate.

The term “hashrate” refers to the rate at which miners produce hashes—the numerical solutions to the complex mathematical problems required to mine a Bitcoin block. A hashrate of one petahash per second (1 PH/s) is equivalent to one quadrillion hashes per second. Hashprice is influenced by several factors, including the Bitcoin block reward size, the price of Bitcoin, and the total hashrate of the Bitcoin network.

The halving event on April 19 cut the fixed Bitcoin block reward size from 6.25 BTC to 3.125 BTC, which naturally pushed the hashprice down. Compounding this issue, Bitcoin’s price has experienced a significant decline throughout June, falling by 11%. This drop has been driven by selling pressure from the United States and German governments and fears of a massive sell-off by Mt. Gox bankruptcy claimants next month.

As miners face increased difficulty in earning profits, many have scaled back their less profitable mining operations. Since the halving, Bitcoin’s total hash rate has decreased from 625 exahashes per second (EH/s) to 581 EH/s, as reported by Blockchain.com.

Additionally, significant sales by miners have contributed to this month’s Bitcoin market dynamics. Marathon Digital (MARA), the largest publicly traded Bitcoin mining firm, sold 1400 BTC within the first ten days of June, compared to 390 BTC throughout the entire month of May. On June 9, miners collectively sold 3000 BTC through exchanges and another 1200 BTC through over-the-counter (OTC) desks—the highest daily amount since March.

In response to these challenging conditions, Marathon Digital announced that it has diversified its mining efforts to include Kaspa, an alternative proof-of-work cryptocurrency network. Since September, this move has generated $16 million for the firm.

The current landscape of Bitcoin mining is undeniably challenging, with miners grappling with reduced profitability and market pressures. How the industry adapts to these changes will be crucial in determining its future trajectory.