One year after Bitcoin halving, how much does it cost to mine 1BTC?

Source: Blockworks; Compiled by: Tao Zhu, Golden Finance

We all know that halving doubles the cost of production, and the media portrays this fact as an existential threat to Bitcoin every four years.

Miners seeking profits must also deal with fluctuating mining difficulty and energy costs. But if the price rises, at least they can get more money for every Bitcoin they mine.

As the price of BTC rises, the high price attracts more miners, which has brought Bitcoin's total hash rate and difficulty to an all-time high.

In fact,While mining revenue is roughly the same as the five-year average, the current mining difficulty is five times that of April 2021 and 40% higher than before the last halving.

As a result, it is more difficult to mine Bitcoin than ever before. But how much does it cost to mine 1 BTC now? It’s always hard to say, and the answer depends a lot on electricity and other indirect costs, which Cambridge currently estimates at $48,671 per BTC. Strong Bitcoin prices have put miners’ revenues almost on par with the peak of the 2021 and 2024 bull runs (source: Blockworks Research).

Let’s take Marathon, a $4 billion mining giant that accounts for about 7% of Bitcoin’s total hash rate.

According to Marathon’s filings with the SEC, its mining revenue costs were $224.95 million in the three quarters before the most recent halving.

Marathon mined a total of 10,542 BTC during the same period, which means the estimated production costs per bitcoin were just under $21,500. At the time, bitcoin was trading at an average price of $39,300, which means a potential profit of $17,800 per bitcoin.

In the third and fourth quarters of last year, Marathon’s estimated production costs using the same methodology were $43,270 — double since the halving, in line with Cambridge’s estimates — while the average trading price was $72,250. That translates to potential profits approaching $29,000, even higher than before the halving.

(Marathon CEO Fred Thiel said in February that Marathon’s direct energy costs totaled $28,801 per bitcoin last year, though that includes some of the costs before production doubles. Marathon’s profit is more than $500 million in the fourth quarter of 2024.)

A year after the halving, the bitcoin block subsidy remains generous enough, at least for the most well-capitalized operations at current prices, according to Marathon. Other miners may be losing money at times, according to Luxor’s Hashrate Index, which shows profitability at its lowest level on record. That’s understandable, given that there have been five halvings.

Either way, bitcoin still has three years to double in price to offset the next price increase. Plenty of time.

Satoshi’s Prophecy

“I am convinced that in 20 years, transaction volume will either be very large or there will be no transaction volume.”

Satoshi said this on Valentine’s Day 2010 — more than 15 years ago.

This was an addendum to comments about the necessity of transaction fees in a system where the block reward gradually decreases to zero over time. “In a few decades, when the reward becomes too small, transaction fees will become the main compensation for nodes.”

So, less than five years on from Satoshi’s hypothesis, how close was he to the truth?

Monthly transfer volume has declined in recent months, but will still grow significantly by 2023 (Source: Blockworks Research).

Bitcoin processes more than 11.5 million transactions per month, up from less than 8 million at the beginning of 2022, translating to an average BTC transaction volume of $1.8 trillion.

On the one hand, this may be "very large" as Satoshi predicted, but more than 98% of miners' income still comes from block subsidies.

After a few more halvings, the current dynamics may no longer be tenable, so expect the debate over Bitcoin’s fee market structure to intensify over time.