More and more Bitcoin miners are throwing in the towel amid soaring energy prices and plunging profitability. This has had a knock-on effect on hash rates and difficulty, which are also starting to fall.
As Bitcoin mining becomes less profitable, more and more rigs are being powered down, resulting in a fall in hash rate and difficulty.
In a report on the State of the Network, analytics firm CoinMetrics delved into the mining sector in what has been a highly volatile quarter for crypto markets.
It cited rising energy costs as a primary reason for the Bitcoin miner exodus. Combined with the slump in BTC prices, the double whammy means more miners are powering down.
“Even with the most cutting-edge mining hardware such as Bitmain’s Antminer S19, each machine costs as much as $1.50 more per day to operate now vs. a year ago,” it noted.
Industrial-scale mining companies with tens of thousands of these machines will be feeling the pinch.
Bitcoin plunging profitability
Mining profitability, measured in dollars per day per terahash per second, started falling when markets did, just after their Nov peak. Since then, mining profitability has slumped 82% from $0.45/day per TH/s to $0.08/day per TH/s, according to Bitinfocharts. It is currently at its lowest levels since Oct 2020, just before the last bull run when BTC was priced at around $11,000.
The powering down of mining rigs has impacted Bitcoin’s hash rate, which is a measure of network computing power and an overall proxy for network health and security. From recent highs of around 250 EH/s, average hash rates have fallen by about 11% to roughly 223 EH/s making mining quite competitive still.
Difficulty, which is an automatically adjusted network-determined parameter, has also started to fall. Although the declines from peak levels are just 5.4%, it is a lagging reaction to lower hash rates due to fewer miners.
This week, Compass Mining lost one of its facilities due to non-payment of power bills. Companies with huge debts for machinery, such as Marathon Digital, are also likely to suffer. Industrial electricity rates in some states, such as Georgia and Oklahoma, have increased by more than 20% over the past year, reported CoinMetrics.
Ethereum mining exodus
A similar situation is happening with Ethereum miners, which is good news for PC gamers. Ethereum can be mined with high-end graphics processors, but with similar factors affecting them, miners have been dismantling their rigs.
As a result, used graphics cards are starting to flood secondary markets as prices and demand dwindles. Good news for gamers, bad news for crypto miners.