Data shows that Bitcoin mining profitability has dropped to just 2020 levels, here are some reasons behind this trend.
Bitcoin miners’ daily revenue is down nearly 10% in the past week alone
According to the latest weekly report from Arcane ResearchBTC miners are now only earning $17.9 million per day, the lowest since November 2020.
A relevant indicator here is the “hash ratewhich is a measure of the total amount of computing power connected to the Bitcoin network.
When the value of this metric increases, it means that miners are currently bringing more platforms online on the blockchain.
One of the characteristics of the BTC network is that it tries to maintain a constant “block production rate” (the number of blocks hashed by miners per hour). However, whenever the hashrate changes, the rate at which miners produce new blocks also changes.
To rectify these discrepancies, the blockchain increases what is called the mining difficulty. For example, increases in hashrate lead miners to hash blocks faster, and so to counter this, the difficulty of the network increases during the next scheduled difficulty adjustment.
Now, here is a chart that shows how some bitcoin miner related metrics have changed in value over the past week:
The fees per day seems to have gone up by 9% during the period | Source: Arcane Research's The Weekly Update - Week 37, 2022
As you can see above, daily Bitcoin miner earnings have dropped 10% over the past week, from $19.8 million to just $17.9 million.
The last time miners saw such low revenue was in November 2020, before the start of the previous bull run.
The report notes that there are two main reasons behind this trend. The first and most important is the difficult price of crypto.
Since miners typically pay their running costs like energy bills in fiat, the USD value of their rewards is the most relevant metric for them. A low BTC price directly leads to a reduction in their income.
The other factor is the mining difficulty which reached a new all-time high following an increase in hashrate. The block production rate currently sits at 5.9, less than the 6 required by the network, which means there will be a difficulty reduction in the next adjustment. But for now, miners are hashing slower and therefore earning less.
At the time of writing, The price of bitcoin is floating around $19,300, down 5% in the past week.
Looks like the value of the crypto has gone down during the last few days | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, Arcane Research