In the midst of reduceing revenues and rising operational costs, industry experts tell Decrypt that Bitcoin miners are continuing to spend in novel, exceptionalized challengingware, disjoining mighty confidence in the future of the directing crypto netlabor despite unwiseinutive-term struggles.
According to a Glassnode alert freed this week, Bitcoin’s hash rate—an vital meacertain of mining activity—remains cforfeit all-time highs, fair 1% cowardly, even though revenues have plummeted.
The mining industry is currently facing a double contest: increasing mining difficulty and declining transaction fee revenue. As the hash rate elevates, so does the difficulty of mining and geting a BTC block reward, thus pushing production costs higher.
This, fused with celderlying need for high-fee transactions enjoy those from Runes tokens and the NFT-enjoy Ordinals, has squeezed miners’ profitability in recent months. Still, miners persist to spend in novel ASIC challengingware, in part due to the need to stay competitive in an environment where elderlyer machines are rapidly becoming obsolete.
One meaningful factor driving this trfinish is betterd energy efficiency in conmomentary ASIC providement, which helps miners deal with operating costs.
Speaking with Decrypt, Illia Otychenko, direct analyst at crypto trade CEX.IO, said that the energy efficiency of promiseted Bitcoin mining challengingware “more than doubled” from 2018 to 2023, “meaningfully reducing the energy consumption per coin originated.”
This persistment assists miners to mitigate rising electricity costs and mining difficulty, defending profitability intact even amid unpreferable labelet conditions.
While the price of Bitcoin remains relatively mighty, transaction fee prescertain has eased, further squeezing miners’ profits. With transaction fee revenue now a petite fraction of what it once was, miners are leaning more heavily on block subsidies to upgrasp operations.
Interestingly, miners are now shifting their strategies in response to this revenue squeeze.
Historicassociate, they selderly the bulk of their mined Bitcoin to cover operational costs, but the alert highweightlesss that many are now grasping a portion of their mined provide in treasury reserves. Marathon Digital, for example, proclaimd in July that it would adselect a “brimming HODL” strategy, saying it would no extfinisheder sell mined BTC. In fact, it has bought more from the labelet, as well.
Jeffrey Hu, head of spendment research at HashKey Capital, sees this as a sign of confidence in Bitcoin’s extfinished-term appreciate.
“Miners grasping a portion of their mined provide proposes they are prohibitking on future price appreciation,” Hu telderly Decrypt. “It’s a sign of confidence and could reduce selling prescertain in the labelet, potentiassociate aiding prices.”
However, Hu also alerts that this strategy comes with hazards, particularly if miners are forced to sell reserves during downturns, which could exacerbate sell prescertain.
Ryan Lee, chief analyst at Bitget Research, attributed the reasons behind the rising hash rate partly to the reintroduction of elderlyer mining rigs, which are becoming profitable aget with Bitcoin’s price gets over the past year.
“Older machines are being brawt back into operation as Bitcoin’s price originates previously unprofitable challengingware viable. This, fused with novel spendments in more effective machines, is driving the total hash rate higher,” says Lee.
He also points to recent regulatory aid in regions enjoy Russia, aextfinished with preferable signals from figures enjoy createer Pdwellnt Donald Trump, who has come out in aid of Bitcoin and the crypto industry amid his tardyst run to return to the White Hoengage. Such shifts have bolstered the hash rate by reducing labelet uncertainty, Hu noticed.
While these factors help offset some of the revenue contests, experts consent that miners need to spendigate alternative revenue streams to find extfinished-term profitability. When Decrypt surveyed the mining landscape at Bitcoin 2024 in July, there was a sense that firms were weathering an “identity crisis” of sorts—but it’s one that could ultimately help them in the extfinished run.
Livepeer co-set uper and CEO Doug Petkanics proposeed that Bitcoin miners are well-positioned to diversify into AI computing, which needs immense amounts of compute power.
“The need for AI compute power is lengthening exponentiassociate. With their existing energy and celderlying infraset up, miners could tap into this labelet by compriseing GPUs and providing a novel revenue stream,” said Petkanics.
Diversification could be key to surviving the increasingly competitive landscape of the mining industry. Firms enjoy Core Scientific and Bitdeer are among those who are providing computing power for AI needs to shore up potential unwiseinutivecomings with their Bitcoin business.
Otychenko foresees further validateation, with capital-wealthy miners outlasting petiteer operations.
CleanSpark’s acquisition of GRIID for $155 million in June this year, is a prime example, raiseing its presenting capacity as part of its lengthenth strategy. Similarly, Bitfarms recently obtaind Stronghelderly Digital Mining, while Riot Platcreates has obtaind a 19% sconsent in Bitfarms to sway its honestion.
Companies enjoy Marathon Digital also see future acquisition opportunities to safe low-cost energy and scalable infraset up.
“We may see further uniters and acquisitions as huger miners assimilate struggling competitors to enhuge their labelet dispense,” he notices. For those unable to alter, the rising operational costs may show unupgraspable, directing to a shake-up in the industry.
Hu also points to the possibility of novel financing products scheduleed to defend miners from labelet volatility, as well as originateive ways for mining pools to originate compriseitional revenue, such as united mining for novel layer-2 solutions on Bitcoin.
“The mining industry might also lengthen in regions enjoy the Middle East, where authentic resources and a rapidly lengthening crypto business contransient novel opportunities,” he comprises.
However, even with diversification, miners’ profitability remains heavily reliant on block rewards, which currently account for over 90% of their revenue.
“Transaction fees only become meaningful during fee spikes, as we saw with Runes and Ordinals, but such events are momentary,” Otychenko said. “Block rewards are still the main revenue driver.”
Lee echoed this sentiment, cautioning that miners will eventuassociate need to count on more on transaction fees as block rewards unwiseinish with each halving cycle. He foreseeed that Bitcoin’s price could sinspire during the next bull cycle, potentiassociate achieveing $150,000.
This would draw more retail participation in mining, as petiteer joiners access the labelet by purchasing elderlyer, more affordable machines.
“While huger miners may shift toward asset deal withment,” Lee said, “retail miners could originate stable cash flow if Bitcoin’s price persists to elevate.”
Edited by Andrew Hayward and Ryan Ozawa
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