According to Cointelegraph, Bitcoin's mining sector is experiencing significant challenges as the hash price, a crucial profitability metric, approaches levels that could potentially force smaller operators offline and impact the broader supply chain. The hash price, which indicates the expected daily revenue per unit of computational power, is currently around $42 per petahash per second (PH/s), having steadily declined from over $62 per PH/s in July. This downward trend is pushing Bitcoin mining operations, already grappling with narrow profit margins, to contemplate shutting down their rigs.
The decline in hash price is also affecting the mining supply chain, with hardware providers receiving fewer orders from struggling miners. These providers are also experiencing losses on any Bitcoin-denominated sales due to the price drop following the October market crash. In response, some mining hardware manufacturers, such as Bitdeer, have resorted to self-mining to compensate for the reduced demand for mining machines. The combination of razor-thin profit margins, high capital expenditure on hardware upgrades, and rising energy costs has prompted many Bitcoin miners to pivot towards AI and high-performance computing data centers to sustain revenue as Bitcoin mining becomes increasingly competitive.
Bitcoin miners face the inevitability of having their rewards halved every four years during the Bitcoin halving, as the computational power and electricity required to mine blocks continue to rise. The Bitcoin network's hashrate has surpassed 1 zetahash per second (ZH/s), reflecting the growing complexity of mining operations. Initially, in 2009, the block reward for successfully mining a block was 50 BTC, with node runners using CPUs on personal computers. However, following the April 2024 halving, the BTC block reward decreased to 3.125 BTC, necessitating the use of specialized mining hardware known as application-specific integrated circuits (ASICs) for BTC mining.
These challenging economic conditions have compelled many miners to diversify into adjacent AI data center and compute businesses, which have proven lucrative. In October, Cipher Mining secured a $5.5 billion agreement with tech giant Amazon to provide compute power to Amazon Web Services over a 15-year period. Similarly, IREN, a Bitcoin mining company, signed a deal with Microsoft in November to offer GPU computing services valued at $9.7 billion. These strategic shifts highlight the evolving landscape of the Bitcoin mining industry as it adapts to the pressures of declining profitability and increasing competition.
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