Bitcoin mining companies are reducing the deployment of their computer resources following a significant downturn in industry earnings last month, as indicated by a Coinshares report released on May 13.
The seven-day rolling average for the Bitcoin network hash rate, which hit an all-time peak last month, has been swiftly decreasing since the start of May. After reaching approximately 650 exahashes per second (EH/s) on April 19, the metric had dropped to 586 EH/s by May 11.
Bitcoin Miners Cut Costs After Halving
A “hash” represents a speculative solution to a complex mathematical puzzle required for solving and mining Bitcoin’s subsequent block. Bitcoin miners engage in a race to crack these blocks, utilizing energy-intensive computer systems designed to generate hashes as rapidly as possible.
Consequently, the overall network hash rate serves as a gauge of the energy miners dedicate to their operations. Typically, hash rate tends to increase over time, but factors affecting miner profitability can prompt adjustments in industry activities. One such event occurred on April 19 with the Bitcoin halving, reducing the fixed subsidy per Bitcoin block from 6.25 BTC to 3125 BTC—a nearly 50% drop in net miner revenue.
Based on their Q4 2023 financial disclosures, CoinShares approximates that publicly listed Bitcoin miners’ average production cost per BTC stood at $53,000 immediately following the halving. With BTC trading at $63,000 on Monday, miners remain profitable, though not as significantly as before.
“Key strategies for mitigating these challenges include optimizing energy expenses, enhancing mining efficiency, and securing advantageous hardware procurement terms,” noted CoinShares. “Miners are actively managing financial obligations, with some employing surplus funds to significantly reduce debt.”
A Changing Miner Landscape
In April, reporting figures from public miners revealed that most had encountered slight yet manageable declines in Bitcoin revenue. However, these drops are expected to deepen further by the end of May.
Notably, some companies like Marathon Digital (MARA) and Riot Platforms (RIOT) disclosed that they had halved their mining activities, with approximately one-third of their hashing power remaining active. This suggests that measures to scale back operations have already commenced.
Fortunately for miners, the emergence of new Bitcoin applications like Ordinals and Runes has contributed to increased on-chain activity and network transaction fees, offering additional sources of profit.
Last week, CryptoQuant CEO Ki Young Ju highlighted that transaction fees now constitute 7% of miner revenue, a significant rise from the 1% recorded two years ago.
