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

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

The Bitcoin hash rate hit a new all-time high above 245 exahashes per second on Oct. 3, however on the similar 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 price of manufacturing at $12,140, Glassnode evaluation suggests “that miners are somewhat on the cusp of acute income distress.”

Bitcoin community hash rate. Source: Hashrate Index

Generally, issue, a measure of how “difficult” it’s to mine a block, is a part of figuring out the manufacturing price of mining Bitcoin. Higher issue means further computing energy is required to mine a new block.

Utilizing a problem regression mannequin, the information 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. Currently, it hovers close to $18,300, which isn’t removed from the value vary seen up to now two weeks.

Bitcoin issue regression mannequin. Source: Glassnode

The hash rate hitting a new all-time high successfully implies that miner margins will likely be additional squeezed. Outfits which are 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 latest rise in hash rate, the issue can also be more likely to rise within the subsequent week, with estimates pointing to a 6% to 10% adjustment.

Bitcoin community hash rate (left) and projected issue adjustment (proper). Source:

Shown under are estimations of miner profitability assuming an electrical energy rate of $0.08 kilowatts per hour.

Bitcoin ASIC profitability. Source: DxPool

Depending 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.

Despite the stress on profitability, unbiased market analyst Zack Voell recommended that miners with wholesome steadiness sheets are consistently in search of methods to increase their operations and the latest surge in hash rate could possibly be associated to Bitmain’s latest S19 XPs coming on-line.

Is Bitcoin within the clear?

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

According to Colin Harper, the top of analysis at Luxor Technologies:

“Miners are still selling in the current environment (for example, Riot sold 300 BTC last month and Bitfarms sold 544 BTC). By my estimation, we’re more likely to be driven lower by general selling, not miner selling particularly. If BTC price does go to $10,000, in addition to more miners capitulating via BTC sales, there would also be a lot of rigs flooding the market. We are not trying to single out Riot or Bitfarms, these are just the current updates we have, besides Hut 8, which didn’t sell any BTC.”

On the opposite hand, Joe Burnett, the top analyst at Blockware Solutions, stated that the majority of miner promoting has doubtless handed, which reduces the opportunity of one other capitulation stage sell-off.

Burnett informed Cointelegraph:

“I think the small miner capitulation Bitcoin experienced this summer knocked out some weak and overleveraged players. I do not think we will see another significant drop in hash rate without Bitcoin making new lows below $17,600. It doesn’t mean individual weak miners won’t drop off this year and next, but the new-gen rigs getting plugged in will likely be enough to keep hash rate trending upward.”

When requested in regards to the surge in hash rate putting strain on greater issue changes and the knock-on-effect on miner profitability, Burnett stated:

“Individual weak players may drop off and get knocked out, but it won’t be a significant and sudden ‘miner capitulation’ without a drop in BTC price. Margins are definitely tight.”

Glassnode’s mannequin of the “implied income stress of the Puell Multiple, with the explicit stress observation of the Difficulty Ribbon Compression” not too long ago exited the zone the place “miner capitulation is statistically likely,” suggesting that one other miner-driven sell-off is unlikely in the intervening time.

Bitcoin miner capitulation danger. Source: 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 retailers.

The views and opinions expressed listed below are solely these of the writer and don’t essentially mirror the views of Every funding and buying and selling transfer includes danger, you need to conduct your individual analysis when making a choice.

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