Bitcoin (BTC) mining: profitability drops to 2020 levels

As the price of energy increases and that of Bitcoin (BTC) decreases, mining activities are seeing their profitability return to their 2020 levels. Despite this, we also observe that the hashrate is, for its part, on historically high levels.

The profitability of Bitcoin mining becomes less attractive

The perverse cocktail of the bear market combined with the rise in energy prices is now having an impact on the profitability of mining. Indeed, Bitcoin miners are seeing their profits plummet to 2020 levels, according to the latest survey from Arcane Research.

According to the latest data, mining the network earns miners $17.9 million per day. In comparison, these were able to record days at 62 million dollars, during the highs of November 2021. Like the prices, this profitability has therefore been divided by nearly 3.5 in less than a year.

Combined with the rise in energy prices, this trend is likely to lead small players to unplug their machines. Indeed, given these elements, it no longer becomes profitable to mine in densely populated areas, where the cost of electricity is higher than in other geographical regions favored by professional miners.

In order to cover their expenses, these miners must indeed sell part of the rewards they receive. As with any industry, there is then no economic interest in continuing its activity, if the production costs exceed the turnover.

The consequences of this state of affairs on the network

When a drop in profitability leads to a drop in mining activity, this automatically leads to a slowdown in the network. This dynamic comes from the fact that there is then less computing power available to produce blocks. Arcane Research notes that since the price of BTC fell back below $20,000, the blockchain has gone from 6.28 to 5.9 blocks per hour.

Let’s relativize anyway. If the production of blocks is certainly not linear, it generally falls within an average ranging from 140 to 160 blocks per day since 2015.

To keep a certain consistency, the mining difficulty will adapt according to the computing power offered by the miners. Currently, this difficulty is also at record levels, as shown in the graph below:

On the other hand, the hashrate does not yet show a real capitulation of the miners. And for good reason, the mining power deployed is also at historic highs, with an average over the last seven days of 225 terahashes per second:

These elements are to be welcomed because even if a future capitulation of the miners is not to be excluded, these data show that the Bitcoin network has never been so secure. Regarding the price of BTC itself, the latter was evolving at around 19,000 dollars, when writing these lines.

Source: Arcane Research, Blockchain.com