Bitcoin Mining Margin Squeeze Sees Revenues Evaporate

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Bitcoin mining operators are having a tough time during the bear market as reduced margins have resulted in much lower revenues.

BTC prices may have rallied back over $20K this week, but Bitcoin mining operations are still in the doldrums.

On Oct. 26, Jaran Mellerud from Hashrate Index reported that mining margins have evaporated over the past year. As an example, he used the gross margin of a Bitmain Antminer S19j Pro which was 88% in October 2021. Today, that gross margin has fallen to 38%.

However, this does mean that Bitcoin mining remains profitable … for now.

Bitcoin mining woes  

According to the report, this time last year, Bitcoin miners could produce 50% more BTC per terahash per second than they can today.

This is largely due to the increase in difficulty, a measure of competition among miners seeking to solve the network’s next block, and a decrease in hashprice.

Hashprice is a measure of market value assigned per unit of hashing power in dollars per terahash per second per day ($/TH/s/d).

Source: hashrateindex.com

The large Bitcoin mining companies and pools have greater capacity in exahashes per second. One EH/s now produces 3.5 Bitcoin per day, compared to 6.7 BTC per day this time last year, the report noted.

This means that only the miners who have doubled their hash power over the past year can earn the same amount of BTC as they did in October 2021. Essentially, the smaller players have been squeezed out of the market.

The report added that hashprice will likely continue trending downward as the difficulty increases. “It looks particularly bad in the long-term,” it said in reference to the May 2024 Bitcoin halving event which will drop block rewards from 6.25 to 3.125 BTC.

Miners that want to remain competitive and profitable will need to continue expanding their hash power to keep up. This additional expense, in addition to escalating energy costs, will become a challenge for many companies.

Bitcoin holds gains

BTC prices have held onto gains made over the past couple of days. The asset has made 2.6% over the past 24 hours to reach $20,778 according to CoinGecko.

As a result, its weekly gain has increased to 8.7% as BTC taps its highest price since mid-September.

The asset is still down 70% from its all-time high and markets are still bearish. The four-month consolidation is still in play and will remain so until BTC can break above $25K.

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