The Bitcoin mining industry is facing increasing pressure, as the price of hash power, a key profitability metric for the industry, is sliding towards levels that could force small miners to shut down and put pressure on the broader supply chain.
The price of hash power measures the expected daily income per unit of hash power, currently around $42 per petahash per second (PH/s). This metric has been steadily declining since July, when it soared to over $62 per PH/s.
According to TheMinerMag, the price of hash power is approaching the $40 mark, leading Bitcoin mining businesses, which are already facing thin profit margins, to consider shutting down their mining machines.
The decline in hash power prices is also affecting the mining supply chain. Hardware suppliers are seeing a decrease in orders from struggling miners, and any sales priced in BTC have also been impacted due to the price drop following the market crash in October, reports indicate.
Mining machine manufacturers, such as Bitdeer, have turned to self-mining to offset the decline in demand for mining machines.
Thin profit margins, high capital expenditures for hardware upgrades, and rising energy costs have led many Bitcoin miners to pivot towards AI and high-performance computing data centers to generate revenue, as Bitcoin mining becomes more competitive.
Bitcoin miners are destined to have their rewards halved every four years during the Bitcoin halving, while the hash power and electricity required to mine blocks continue to rise.
The initial block reward for successfully mining a block in 2009 was 50 BTC, with node operators using personal computer CPUs to mine BTC.
After the halving in April 2024, the BTC block reward will drop to 3.125 BTC, whereas today, mining BTC requires specialized mining hardware known as application-specific integrated circuits (ASICs).
These harsh economic conditions have forced many miners to diversify into adjacent AI data centers and hash power businesses, creating billions of dollars in revenue for companies that complete the transition.
In October, Cipher Mining signed a $5.5 billion agreement with tech giant Amazon to provide hash power for Amazon Web Services over a 15-year period.
Bitcoin mining company IREN signed a similar agreement with Microsoft in November, providing GPU computing services worth $9.7 billion.
Related: Ethereum (ETH) network activity slows, Gas fees drop to just 0.067 Gwei
Original article: “Hash power price nears $40 mark, Bitcoin (BTC) miners return to ‘survival mode’”
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