The Bitcoin hash rate hit a new all-time high above 245 exahashes per second on Oct. 3, but at the same time, Bitcoin (BTC) miner profitability is near the lowest levels on record.
With prices in the low $20,000 range and the estimated network-wide cost of production at $12,140, Glassnode analysis suggests “that miners are somewhat on the cusp of acute income distress.”
Bitcoin network hash rate. Source: Hashrate Index
Generally, difficulty, a measure of how “difficult” it is to mine a block, is a component of determining the production cost of mining Bitcoin. Higher difficulty means additional computing power is required to mine a new block.
Utilizing a difficulty regression model, the data shows an R2 coefficient of 0.944, and the last time the model flashed signs of the miners’ distress was during BTC’s flush out to $17,840. Currently, it hovers near $18,300, which is not far from the price range seen in the past two weeks.
Bitcoin difficulty regression model. Source: Glassnode
The hash rate hitting a new all-time high effectively means that miner margins will be further squeezed. Outfits that are unprofitable can either mine at a loss, assuming that BTC’s future price will eventually make up for the cost difference, or they can unplug and wait until either the difficulty drops or energy costs improve.
With the recent rise in hash rate, the difficulty is also likely to rise in the next week, with estimates pointing to a 6% to 10% adjustment.
Bitcoin network hash rate (left) and projected difficulty adjustment (right). Source: BTC.com
Shown below are estimations of miner profitability assuming an electricity rate of $0.08 kilowatts per hour.
Bitcoin ASIC profitability. Source: DxPool
Depending on a miners’ capital costs and operational costs, the profit stats above clearly illustrate the tightrope some miners are attempting to balance on at the moment.
Despite the stress on profitability, independent market analyst Zack Voell suggested that miners with healthy balance sheets are constantly looking for ways to expand their operations and the recent surge in hash rate could be related to…