Data shows the Bitcoin mining profitability has dropped down to just 2020 levels, here are some reasons behind this trend.
Bitcoin Daily Miner Revenues Declined Almost 10% In Last Week Alone
As per the latest weekly report from Arcane Research, BTC miners are now making just $17.9 million per day, the lowest since November 2020.
A relevant indicator here is the “hashrate,” which is a measure of the total amount of computing power connected to the Bitcoin network.
When the value of this metric goes up, it means miners are bringing more rigs online on the blockchain right now.
One feature of the BTC network is that it tries to maintain a constant “block production rate” (the number of blocks being hashed by miners per hour). However, whenever the hashrate changes, so does the rate at which miners produce new blocks.
To rectify such deviations, the blockchain increases what’s known as the mining difficulty. For example, increases in the hashrate lead to miners hashing blocks faster, and so to counteract it, the network difficulty goes up in the next scheduled difficulty adjustment.
Now, here is a table that shows how some Bitcoin miner-related metrics have changed in value during 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, the daily Bitcoin miner revenues have plummeted 10% over the last week from $19.8 million to only $17.9 million.
The last time miners observed such a low income was back in November 2020, before the previous bull run began.
The report notes that there are two main reasons behind this trend. First and the more important one is the struggling price of the crypto.
Since miners generally pay their running costs like energy bills in fiat, the USD value of their rewards is the more relevant metric to them. A low BTC price directly leads to a reduction in their revenues.
The other factor is the mining difficulty rising up to a new all-time high as a result of a surge in the hashrate. The block production rate sits at 5.9 right now, 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 hence making lesser amounts.
At the time of writing, Bitcoin’s price floats around $19.3k, 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