Bitcoin Miners Sell BTC and Rigs to Cope With High Energy Prices

Bitcoin miners are having a tough time this year as an energy price crisis is eating into their profits while hashrate and difficulty keep surging.

In its third-quarter report published on Oct. 19, the Bitcoin mining portal Hashrate Index revealed the extent to which miners were suffering during the downturn.

Hashprice, which is a measure of market value assigned per unit of hashing power in dollars per terahash per second per day ($/TH/s/d), has slumped 83.5% since the same time last year.

The index, which measures the metric over time, reports that hashprice, also known as mining profitability, has fallen from $0.412/THs/day in October 2021 to $0.068 today.

Energy price hikes hurting

Throughout the third quarter, public mining firms have “continued to hock mining rigs and BTC to fund operations and pay down debt,” the report noted. It added that distressed asset sales started to crop up, and the first major mining bankruptcy occurred. Compute North, the second-largest BTC mining hosting provider in the U.S., filed for bankruptcy in September.

The declining profitability has been directly attributed to rising energy prices and falling BTC prices.

The average cost of industrial electricity in the United States has increased 25% from $75 a megawatt hour to $94 per MWh from July 2021 to July 2022, the report revealed. Some states, such as Texas and Georgia, saw even sharper increases of around 65% over the period.

Bitcoin mining researcher Jaran Mellerud compared the costs of producing one BTC in Texas a year ago to today.  

The report added that the majority of hosting providers in the U.S. are “butting up against breakeven thresholds”. This appears true, even for newer-generation mining hardware like the Bitmain Antminer S19j Pro.

Cash-strapped miners continued liquidating Bitcoins during the third quarter though the selling slowed towards the end of the period. For the first time since May, public miners sold fewer BTC than their monthly production in both August and September, it stated.

Bitcoin mining hashrate and difficulty peaks

These power problems have been compounded by recent all-time highs in network hashrate and difficulty. This has made it mathematically harder to mine the next block.

According to BitInfoCharts, the average hashrate (often termed network horsepower) is 271.5 exahashes per second (EH/s). This is an increase of 66.5% since the same time last year. It hit an all-time high of 295 EH/s on October 11.

The difficulty metric, which measures competition among miners seeking to solve the network’s next block, is also at an all-time high of 35.6T. Both metrics, when at highs, make it much harder to mine Bitcoins for companies and mining pools alike.