Bitcoin Trades Below Mining Production Cost

Bitcoin continues to trade below its estimated average production cost, increasing stress across the mining sector. According to data from Checkonchain, the average cost to mine one bitcoin is near $87,000, while the market price has slipped toward $70,000.

This places Bitcoin roughly 20% below its estimated production cost. Historically, trading below this threshold has been a common feature of bear market conditions and signals elevated pressure on mining profitability.

Rising costs and declining profitability

The production cost estimate relies on Bitcoin network difficulty as a proxy for industry-wide expenses. By linking difficulty to network capitalization, analysts derive an approximation of all-in mining costs.

Similar patterns emerged during previous market downturns. In both 2019 and 2022, Bitcoin traded below production cost before gradually converging back toward it. However, these periods were marked by reduced miner profitability and operational stress.

Network hashrate, which measures total computational power securing Bitcoin, peaked near 1.1 zettahash per second in October. Since then, it declined by around 20% as less efficient miners shut down operations. More recently, hashrate has rebounded to approximately 913 EH/s, indicating partial stabilization.

Miner capitulation remains a key risk

Despite signs of hashrate recovery, many miners remain unprofitable at current price levels. Revenue generated from block rewards and fees often fails to cover operating costs, including electricity and debt servicing.

As a result, miners continue to sell Bitcoin reserves to fund daily operations. This sustained selling pressure reflects ongoing miner capitulation and highlights persistent strain across the sector.

Analysts suggest that prolonged periods below production cost can accelerate industry consolidation. Less efficient operators may exit the market, while stronger players adapt through cost optimization and strategic shifts.

Over time, declining hashrate could lead to downward difficulty adjustments, improving economics for remaining miners. Until then, the Bitcoin mining sector remains under pressure as it navigates a challenging market environment.

Read also: Bitcoin Mining Cost Rises to $74,300 per BTC