Bitcoin miners see healthy gains despite adverse conditions, what this means for the network
Bitcoin is up almost 40% year-to-date (YTD), giving miners a much-needed boost in profitability. Encouraged by the recent recovery of BTC, several miners are returning to the game, and some are even posting record monthly earnings. However, all is not smooth. Over the past two weeks, miners have faced record mining difficulties and rising hash rates.
Bitcoin miners have had a terrible time in 2022. Falling BTC prices have forced several miners to scale back their operations or look for other sources of income. Some miners even closed up shop and declared bankruptcy, especially as the collapse of FTX intensified an already bitter crypto winter. Fortunately, there appears to be light at the end of the tunnel for Bitcoin miners, with the crypto market showing significant resurgence since the start of 2023.
Bitcoin is up almost 40% year-to-date (YTD), giving miners a much-needed boost in profitability. Encouraged by the recent recovery of BTC, several miners are returning to the game, and some are even posting record monthly earnings. However, while bitcoin mining seems to be making a comeback, it’s not all easy. Over the past two weeks, miners have faced record mining difficulties and rising hash rates.
On January 30, mining difficulties reached a new all-time high, reaching a score of 39.35 trillion. That’s a 4.68% increase from its previous high of 37.59 trillion. Mining difficulty refers to the amount of computing power required to mine a block of transactions on a blockchain network. The increasing difficulty of Bitcoin mining means that miners have to devote more computing power than before to mine a block of transactions. Mining difficulty usually increases when there are more miners on the network and vice versa.
Moreover, the hash rate of Bitcoin has also skyrocketed lately. Hash rate refers to the total computing power dedicated to the network at any given time. Bitcoin’s hash rate jumped to 337.95 million ExaHashes per second (EH/s) on January 26, an all-time high. However, it has since declined to some extent and currently hovers around 290 million PE/s. An increase in Bitcoin’s hash rate means an increase in miners on the network. As such, it will make mining difficult as more miners compete to verify the same transactions.
However, even with these unfavorable conditions, Bitcoin miners seem to be doing much better than in 2022. For example, Riot Blockchain, the world’s largest Bitcoin miner, recorded its highest monthly count of Bitcoin mined in a month. The company was able to mine a whopping 740 BTC in January 2023. This is around 62% more than the same figure in January 2022 and 12% more than in December 2022. What is even more incredible is that the mining company was able to achieve this feat despite a reduction in its mining rigs. At the time of writing, Riot’s 740 BTC haul was worth nearly $17 million.
Additionally, boosted by rising BTC prices, crypto mining stocks hit yearly highs in January. For example, Bitfarms, a major bitcoin miner, saw its stock soar almost 140%, hitting C$1.44, its highest price since September 2022. Another popular bitcoin miner, Marathon Digital, has saw its stock soar to $9 on Jan. 23, its highest point in more than two months. Riot Digital also saw its stock surge to a 3-month high of $7.49 on February 2.
Moreover, despite these unfavorable conditions, some mining companies have managed to raise funds to further develop their mining operations. For example, Canadian Bitcoin mining company Blockstream recently raised $125 million to expand its mining infrastructure.
Additionally, Bitcoin’s hash price increased by more than 20% on January 19. The hash price is a metric that indicates the value of mining or computing power devoted to the Bitcoin network. This basically tells us how profitable each terra hash of IT is. On January 19, Bitcoin mining profitability soared to $0.07874 Terra Hash per day (TH/d), which is a decent improvement from its $0.06 TH/d since inception of 2022. This is still a far cry from BTC’s record hash price of $0.22 TH/d in 2021.
“The recent increase in hash price is positive, but many miners are still operating with low margins. A year ago, the hash price was $0.22/TH/day. low point, the current economic conditions for mining remain challenging,” said Digital Mining Solutions co-founder Nico Smid.
What does this mean for Bitcoin?
These are all positive signs for Bitcoin. Increasing mining difficulty and hashrates are indications of a growing network. This means that miners are ready to join the network despite the adverse conditions. And the fact that Bitcoin miners are doing well despite the headwind is all the more promising. However, cryptocurrencies are very volatile. The prices of these coins can fluctuate wildly within minutes or even minutes. Sometimes they can challenge even the strongest fundamental and technical indicators. Therefore, it is important to do your own research and invest only as much as you can afford to lose completely.
(Edited by : Anouchka Sharma)