The Bitcoin mining industry is increasingly under pressure as hash prices, a key measure of profitability, have fallen to levels that could drive smaller operators offline and put pressure on mining equipment providers and service partners.
Hash prices are approaching dangerous levels.
Hash prices (estimated daily revenue per unit of computing power) are currently around $42 per PH/s, down from more than $62 per PH/s in July, according to industry reports.
The decline towards the $40 mark is causing some smaller and less efficient miners to consider powering down their equipment. The report found that when profits fall to this level, thin-margin operators can no longer cover power and maintenance costs.
Hardware manufacturers and hosting companies are being affected. Machine orders have slowed and any income tied to Bitcoin has lost value since the October market drop.
Some manufacturers have started mining with their own machines to offset weak customer demand. Bitdeer and similar companies are reported to be expanding their own mining operations to fill the revenue gap.
Hash price drops and approaches a critical level. Source: TheMinerMag
Miners move to AI computing
High capital costs and steady increases in hash rates are making running ASIC farms more difficult, especially after the April 2024 halving, which will reduce block rewards to 3.125 BTC.
In 2009, the block reward was 50 BTC and people could mine with CPU. Today, only specialized hardware makes mining possible for most operators. This shift has led some companies to shift capacity to general compute for AI workloads.
Big deals show the trend is real, according to the report. Cipher Mining signed a $5.5 billion, 15-year contract last October to provide computing power to Amazon Web Services.
IREN later agreed to provide GPU services to Microsoft in a $9.7 billion deal. This move is intended to generate steady profits at a time when Bitcoin mining revenues are declining.
Market downturn adds to miner stress
Bitcoin’s price weakness has made matters worse. The token briefly fell below $100,000, trading 20% below its October 6 high of $126,000.
Analysts point to massive selling by long-term holders. Since the end of June, the group’s net sales have surpassed 1 million bitcoins, according to Compass Point analyst Ed Engel.
A massive liquidation of leveraged positions on October 10 also rocked the market, breaking support levels near $117,000 and $112,000.
Image: Dragos Condrea / Getty Images
Markus Thielen, founder and CEO of 10X Research, says the market’s failure to recover key levels signals a bearish situation, and his firm argues that Bitcoin could still fall further before a bottom appears.
His team had previously predicted a drop to $100,000 and now says a buyable bottom could be “a few weeks away.”
Featured image from Pexels, chart from TradingView
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