Bitcoin mining just got significantly more expensive. Production costs surged roughly 9% this quarter. The median cost to mine one Bitcoin now exceeds $70,000. This marks a sharp climb from just $52,000 last December.
Miners face mounting pressure. TheMinerMag research firm confirmed this steep increase Monday. Their May/June industry update details the challenging trend. Specifically, costs rose 23% earlier this year. Now, they climb further in Q2. “Direct production costs will surpass $70,000 now,” stated TheMinerMag.
Higher Hashrate and Energy Prices
What’s driving these rising costs? Primarily, two powerful forces converge. First, the Bitcoin network’s total computing power (hashrate) relentlessly grows. Miners globally deploy more machines, increasing competition. At the same time, solving the complex puzzles for Bitcoin rewards demands more effort. Therefore, miners burn significantly more electricity. Second, energy prices themselves are soaring. For instance, Terawulf reported energy costs nearly doubled year over year. Their cost hit $0.081 per kilowatt-hour last quarter. Previously, it was only $0.041. Ultimately, these twin pressures squeeze margins hard.
Profitability Shrinks for Some Miners
Fortunately, Bitcoin’s market price offers crucial relief currently. Bitcoin trades near $107,635. Therefore, most miners still operate profitably. However, this buffer is thinning for less efficient operators. Their profit margins shrink considerably under the $70,000+ production cost. Remember, this cost estimate excludes crucial factors. It omits mining rig depreciation.
Furthermore, it includes income from rented-out machines. Actual net profitability varies widely. Public miners aggressively prioritise fleet efficiency. TheMinerMag highlighted their focus on “fleet hashcost”. This term means the cost per unit of computing power. Remarkably, the median fleet hashcost held steady near $34 per PH/s last quarter. Nevertheless, some firms saw costs surge over 25%. Terawulf and Bitdeer faced particularly sharp increases.
Investors Favours Diversification
Bitcoin mining stocks tell a divergent story. Investor sentiment clearly favours diversified companies. Mining stocks performed very differently recently. For example, Bitcoin’s price rose only 1.35% from May 4 to June 13.
Following the BTC price increase, IREN stock soared 21.4% in that period. Similarly, Core Scientific (CORZ), Bit Digital (BTBT), and Cipher Mining (CIFR) posted double-digit gains. However, Canaan (CAN) and Bitfarms (BITF) plummeted. Each lost over 21%. “The performance spread widened significantly,” noted TheMinerMag. “Investors increasingly focus on revenue beyond Bitcoin mining.” Indeed, diversification is now key. Many top miners actively pursue AI hosting services. Others develop high-performance computing offerings. These ventures provide essential alternative income streams. Because of this they cushion against Bitcoin mining’s volatility.
Written By Fazal Ul Vahab C H
