Bitcoin's Mining Dilemma: Striking a Balance

The computational strength of the Bitcoin network keeps surging, bolstering its security but presenting a challenge for miners who face heightened competition.

Blockchain.com reported a fresh pinnacle in Bitcoin's hashrate, reaching a whopping 447 exahashes per second on October 12.

Bitinfocharts presents a slightly higher average, noting an impressive 481 EH/s. Regardless of the source, both agree that this marks an all-time high for this metric.

Another all-time high for Bitcoin's hash rate: pic.twitter.com/ERhI5g12Hs

— Will Clemente (@WClementeIII) October 12, 2023

Miners Under Strain

Miners are feeling the pressure. The hashrate has ascended by 77% since the year's outset and an astonishing 170% since the peak of the bull market in November 2021. Consequently, mining the subsequent block on the blockchain has become an even more formidable task.

In a few days, the next difficulty adjustment is anticipated, potentially soaring to a daunting +7.4%. Difficulty, a gauge of miner rivalry, has soared to an unprecedented 57.3T.

The outcome is a decline in mining profitability, also recognized as hashprice, plummeting to $0.06 per TH/s per day. This reflects an 85% reduction from the $0.40 per TH/s per day peak during the bull market, mirroring the downtrend in mining profitability.

Bitcoin miners face a triple challenge of surging hash rates and difficulty, depreciated asset values, and soaring energy expenses.

Adding to the complexity, JPMorgan forecasts a 20% reduction in hash rates post the impending halving in late April or early May.

“Not all miners created equal. Miners vary by scale, operating efficiency, access to capital and growth prospects. We believe CLSK, our top pick, offers the best balance of scale, growth potential, power costs, and relative value. MARA is the largest operator but has the highest… pic.twitter.com/Jj3CseRI6M

— S Matthew Schultz (@smatthewschultz) October 11, 2023

Recently, trader Oliver Velez emphasized that the United States commands a substantial 40% share of the global hashrate. Moreover, investment giant BlackRock has injected funds into major Bitcoin mining enterprises such as Riot Platforms, Marathon Digital, Cipher Mining, Hut 8, and Terawulf. Additionally, it extended financial assistance to the financially distressed Bitcoin miner Core Scientific in December.

"It is evident that the U.S. is actively vying for dominance in the hashrate race," he commented.

The U.S. now has 40% of the #Bitcoin hash rate. Black Rock is now one of the largest owners of publically traded ##BTC miners.

It is clear that the U.S. is playing to win the hashrate war. Despite these numbers seeming large, all publically traded Bitcoin miners combined… pic.twitter.com/2LhVC3BrY1

— Oliver L. Velez ⚡️ 13%'er Bitcoiner (@olvelez007) October 11, 2023

Bitcoin Price Prospects

Turning to the BTC price outlook, unless Bitcoin's value experiences an upturn soon, a potential miner capitulation looms. The approaching halving, approximately six months away, will double the challenges for miners as the block reward is halved.

Previous estimates hinted that BTC prices would need to surpass approximately $90K for mining to remain lucrative at current levels.

However, the current market trajectory is opposite. BTC remains steady at $26,844 for the day but has seen a 4% decline since last weekend.

Notably, a strong support level persists at $26K, a likely short-term destination.

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