Many bitcoin miners, who expanded their operations in 2021 to capture more profits, are now struggling as the price of the crypto has crashed.
Daily revenue from the bitcoin mining industry fell to $18 million from a peak of $62 million in November, when the biggest crypto hit an all-time high, according to a note released Tuesday by analysts at Arcane. Research.
“The biggest cost historically for bitcoin miners has been their power source,” Messari analyst Sami Kassab said in a recent interview. As energy prices rose, while bitcoin BTCUSD,
fell more than 70% from its all-time high last November, “that’s where a lot of miners got into unprofitability,” Kassab said.
Additionally, crypto miners have invested heavily in new mining infrastructure in 2021 to earn a share of the sizable profits, as total industry revenue has risen from $5 billion in 2020 to $16.7 billion. in 2021, according to Arcane analysts.
Bitcoin’s hashrate, which measures the total computing power used to secure the network, has increased as more machines come online. In response, the Bitcoin network, by design, increased its difficulty level, making it harder for miners to earn rewards.
“The rising difficulty means that not only are total mining industry revenues much lower today than in 2021, but the competition for those revenues has also increased,” according to the note from Arcane Research.
“Bitcoin mining’s current position in its cycle means it will only get worse unless bitcoin’s price rebounds as new mining capacity continues to come online,” wrote Arcane analysts.
Lily: Hard times in bitcoin mining. Pressure from miners likely to continue, analyst says
Due to this pressure, more miners sold their bitcoin holdings. Core Scientific sold 7,202 bitcoins at an average price of around $23,000 per coin for a total of $167 million, according to a statement on Tuesday.