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

The Bitcoin hash fee hit a brand new all-time excessive above 245 EH/s on Oct. 3, however on the similar time, BTC miner profitability is close to the bottom ranges on document. 

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

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Bitcoin community hash fee. Supply: Hashrate Index

Typically, problem, a measure of how “tough” it’s to mine a block, is a part of figuring out the manufacturing price of mining Bitcoin. Increased problem means further computing energy is required to mine a brand new block.

Using a Issue Regression Mannequin, the info exhibits 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 worth vary seen previously two weeks.

Bitcoin: Issue regression mannequin. Supply: glassnode

The hash fee hitting a brand new all-time excessive successfully implies that miner margins might be additional squeezed and 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 issue drops or power prices enhance.

With the current rise in hash fee, the issue can be more likely to rise within the subsequent week, with estimates pointing to a 6% to 10% adjustment.

Bitcoin community hash fee (left) and projected problem adjustment (proper). Supply:

Proven beneath are estimations of miner profitability assuming an electrical energy fee of $0.08 kw/h.

Bitcoin ASIC profitability. Supply: DxPool

Relying on a miners’ capital prices and operational prices, the revenue stats above clearly illustrate the tightrope some miners try to steadiness on in the intervening time.

Regardless of the stress on profitability, impartial market analyst Zack Voell urged that miners with wholesome steadiness sheets are always on the lookout for methods to develop their operations and the current surge in hash fee could possibly be associated to Bitmain’s latest S19 XPs coming on-line.

Is Bitcoin within the clear?

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

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

“Miners are nonetheless promoting within the present setting (for instance, Riot offered 300 BTC final month and Bitfarms offered 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 through BTC gross sales, there would even be a variety of rigs flooding the market. We aren’t attempting to single out Riot or Bitfarms, these are simply the present updates we’ve, in addition to Hut 8, which did not promote any BTC.”

Alternatively, Joe Burnett, the pinnacle analyst at Blockware Options, said that the majority of miner promoting has seemingly handed, which reduces the potential of one other capitulation degree sell-off.

Burnett advised Cointelegraph:

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

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

“For certain. Particular person weak gamers could drop off and get knocked out, however it will not be a big and sudden “miner capitulation” with out a drop in BTC value. Margins are positively tight.”

In keeping with Glassnode, their mannequin of the “implied earnings stress of the Puell A number of, with the specific stress commentary of the Issue Ribbon Compression” just lately exited the zone the place “miner capitulation is statistically seemingly,” suggesting that one other miner-driven sell-off is unlikely in the intervening time.

Bitcoin miner capitulation threat. Supply: glassnode

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