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

The Bitcoin hash price hit a brand new all-time excessive above 245 exahashes per second on Oct. 3, however on the identical time, Bitcoin (BTC) miner profitability is close to the bottom ranges on document. 

With costs within the low $20,000 vary and the estimated network-wide value of manufacturing at $12,140, Glassnode evaluation suggests “that miners are considerably on the cusp of acute earnings misery.”

Usually, issue, a measure of how “troublesome” it’s to mine a block, is a part of figuring out the manufacturing value of mining Bitcoin. Larger issue means extra computing energy is required to mine a brand new block.

Using a problem regression mannequin, the info reveals an R2 coefficient of 0.944, and the final time the mannequin flashed indicators of the miners’ misery was throughout BTC’s flush out to $17,840. At present, it hovers close to $18,300, which isn’t removed from the value vary seen up to now two weeks.

The hash price hitting a brand new all-time excessive successfully signifies that miner margins might be additional squeezed. Outfits which can be unprofitable can both mine at a loss, assuming that BTC’s future value will finally make up for the fee distinction, or they’ll unplug and wait till both the problem drops or power prices enhance.

With the latest rise in hash price, the problem can be more likely to rise within the subsequent week, with estimates pointing to a 6% to 10% adjustment.

Proven beneath are estimations of miner profitability assuming an electrical energy price of $0.08 kilowatts per hour.

Relying on a miners’ capital prices and operational prices, the revenue stats above clearly illustrate the tightrope some miners are trying to stability on for the time being.

Regardless of the stress on profitability, unbiased market analyst Zack Voell instructed that miners with wholesome stability sheets are consistently on the lookout for methods to develop their operations and the latest surge in hash price might be associated to Bitmain’s latest S19 XPs coming on-line.

Miners who aren’t broke or suing one another persevering with to deploy what they’ll. Each month has a pair headlines (a minimum of ) about new services being deliberate or energized. And a variety of the brand new hashrate is from XPs coming on-line

— Zack Voell (@zackvoell) October 3, 2022

Is Bitcoin within the clear?

What buyers actually need to know is whether or not or not Bitcoin value is within the clear or whether or not there’s an elevated danger of one other sell-off pushed by miner capitulation.

In accordance with Colin Harper, the pinnacle of analysis at Luxor Applied sciences:

“Miners are nonetheless promoting within the present setting (for instance, Riot bought 300 BTC final month and Bitfarms bought 544 BTC). By my estimation, we’re extra more likely to be pushed decrease by basic promoting, not miner promoting significantly. If BTC value does go to $10,000, along with extra miners capitulating by way of BTC gross sales, there would even be a variety of rigs flooding the market. We’re not attempting to single out Riot or Bitfarms, these are simply the present updates now we have, moreover Hut 8, which didn’t promote any BTC.”

Then again, Joe Burnett, the pinnacle analyst at Blockware Options, stated that the majority of miner promoting has seemingly handed, which reduces the opportunity of one other capitulation degree sell-off.

Burnett advised Cointelegraph:

“I feel the small miner capitulation Bitcoin skilled this summer season knocked out some weak and overleveraged gamers. I don’t assume we are going to see one other important drop in hash price with out Bitcoin making new lows beneath $17,600. It doesn’t imply particular person weak miners gained’t drop off this 12 months and subsequent, however the new-gen rigs getting plugged in will seemingly be sufficient to maintain hash price trending upward.”

When requested concerning the surge in hash price inserting strain on greater issue changes and the knock-on-effect on miner profitability, Burnett stated:

“Particular person weak gamers could drop off and get knocked out, however it gained’t be a big and sudden ‘miner capitulation’ with no drop in BTC value. Margins are positively tight.”

Glassnode’s mannequin of the “implied earnings stress of the Puell A number of, with the express stress remark of the Problem Ribbon Compression” lately exited the zone the place “miner capitulation is statistically seemingly,” suggesting that one other miner-driven sell-off is unlikely for the time being.

The analysts, nonetheless, had been cautious to emphasize that the combination dimension of Bitcoin held by miners is close to 78,400 and any sharp draw back transfer in BTC value may set off promoting from distressed mining shops.