By Frances Yue
Many bitcoin miners, who expanded operations in 2021 to capture more profits, are now struggling as the crypto’s price crashed.
The bitcoin mining industry’s daily revenue plummeted to $18 million from a peak of $62 million in November, when the largest crypto reached an all-time high, according to a Tuesday note by analysts at Arcane Research.
“The biggest cost historically for bitcoin miners has been their energy source,” Sami Kassab, analyst at Messari, said in a recent interview. As energy prices rose, while bitcoin /zigman2/quotes/31322028/realtime BTCUSD -0.68% fell more than 70% from its record high last November, “that right there has left a lot of miners finding themselves in the unprofitability,” Kassab said.
What’s more, crypto miners invested massively in new mining infrastructure in 2021 to gain a share of the sizable profits, as the industry’s total revenue went up to $16.7 billion in 2021 from $5 billion in 2020, according to the Arcane analysts.
Bitcoin’s hashrate, which measures the total computational power used to secure the network, has been growing with more machines coming online. In response, the Bitcoin network, by its design, increased its difficulty level, making it harder for miners to get rewards.
“The increasing difficulty means that not only is the mining industry’s total revenue much lower now compared to in 2021, but the competition for this revenue has also increased,” according to the Arcane Research note.
“The bitcoin mining industry’s current position in its cycle means that it will only continue to get worse unless the bitcoin price rebounds, due to new mining capacity continue coming online,” the Arcane analysts wrote.
Due to such pressure, more miners have been selling their bitcoin holdings. Core Scientific sold 7,202 bitcoins at an average price of about $23,000 per coin for a total of $167 million, according to a Tuesday statement.