Bitcoin’s hash rate hit a new all-time high above 245 exahs per second on October 3, but at the same time, the profitability of Bitcoin (BTC) mining is nearing all-time lows.
With prices in the low $20,000 range and an estimated production cost for the entire network at $12,140, Glassnode’s analysis notes that “miners are slightly on the way to severe income distress.”
Bitcoin network hash rate. Source: Hashrate. Index
Generally speaking, difficulty, which is a measure of how “difficult” mining a block is, is a component in determining the production cost of bitcoin mining. The higher difficulty level means that additional computing power is required to mine a new block.
Using the difficulty regression model, the data shows an R2 coefficient of 0.944, the last time the model flashed signs of miners’ distress was when BTC rose to $17,840. Currently, it is hovering near $18,300, which is not far from its price range seen in the last two weeks.
Bitcoin Difficulty Regression Model. Source: Glassnode
The hash rate reaching a new all-time high effectively means that mining margins will shrink further. Unprofitable outfits can either deal with the loss, assuming that the future price of BTC will eventually compensate for the cost difference, or they can disconnect from it and wait until the difficulty decreases or energy costs improve.
With the recent increase in the hashrate, the difficulty is likely to increase next week as well, with estimates pointing to a 6-10% adjustment.
Bitcoin network hash rate (left) and expected difficulty adjustment (right). Source: BTC.com
Below are estimates of miner profitability assuming a power rate of $0.08 kWh.
Bitcoin ASIC Profitability. Source: DxPool
Depending on miners’ capital and operating costs, the profit statistics above clearly show the tight band some miners are trying to balance right now.
Despite the pressure on profitability, independent market analyst Zach Foyle suggested that miners with good balances are constantly looking for ways to grow their business, and that the recent increase in hashrate could be related to Bitmain’s latest S19 XP releases that went online .