Bitcoin Mining Profitability Nears All-Time Low Amid Rising Challenges

The profitability of Bitcoin mining has plummeted, nearing a historic low according to the Bitcoin Hashprice Index, which tracks earnings relative to computing power. Recent data shows that miners are now earning just $57 per petahash per second (PH/s) of power each day, a stark decrease from the peak earnings of $3,500 in late 2021. This alarming drop highlights the growing difficulties faced by the mining sector, particularly following the latest Bitcoin halving event, according to RBC.

The halving, which occurred on April 20, 2024, has exacerbated the challenges for miners by slashing the reward for mining new blocks in half, significantly impacting their earnings. This event is coupled with a record surge in the complexity of mining operations and a decrease in transaction fees, further squeezing profitability. On the night of the halving, transaction fees spiked to a record $128 due to increased activity associated with the launch of the new Runes protocol, but quickly retreated to a modest $12.

Moreover, the cost of mining a single Bitcoin has dramatically increased. Estimates indicate that the average cost rose to about $29.5 thousand in Q4 2023 and is expected to surge to $53 thousand post-halving. This increase is prompting mining companies, like the US-based Bitfarms, to invest heavily in more efficient mining equipment, with a reported $240 million expenditure planned to cope with the halving’s impact.

The overall situation poses substantial financial risks for miners. The sector could see losses totaling $10 billion due to reduced earnings from mining activities, with a further $11.5 billion drop in Bitcoin issuance rates projected by analysts at Bitwise. This underscores the critical phase the mining industry is undergoing, necessitating significant adaptations to sustain operations amidst escalating difficulties.