Bitcoin Mining

Bitcoin miners catch a break as revenue per TH/s hits its maximum in three months

The sudden increase in Bitcoin’s price gave miners some peace, but how long can it last?

Bitcoin miners might as well celebrate this week.

For the last year, they have been struggling to remain afloat. The increase in electricity prices, a new wave of unfavorable regulations in many countries, and, most importantly, Bitcoin’s price action have all been terrible blows to miners’ operations. Not to mention, profitability.

Furthermore, in November 2022, revenue per TH/s — also known as hashprice — reached a new all-time low. That being said, this year changed the tone.

Fundamental factors for revenue per TH/s

The profitability of mining depends on a number of factors, including but not limited to the cost of electricity, the mining difficulty, and the current price of Bitcoin. Let’s focus on the last two.

Mining difficulty is a measure of how difficult it is to find a new block on the blockchain. As more hashrate joins the network, the mining difficulty increases, making it harder for any individual miner to be profitable.

The price of Bitcoin is also an important factor in determining mining profitability. When the price of Bitcoin increases, mining becomes more profitable even with high electricity costs and mining difficulty.

To be profitable, miners must carefully consider all of these factors and make sure that their costs are lower than the revenue they can generate through mining.

This requires continuously monitoring and adjusting the mining operation to optimize costs, revenue, and profits. But Bitcoin’s unpredictable volatility makes this a cumbersome task. And while this unpredictability has given miners much trouble in the past, today it has brought them some joy.

Bitcoin’s price, mining revenue’s biggest driver

Indeed, the reason behind miner revenue’s spectacular recovery has everything to do with Bitcoin’s price action.

According to Coin Metrics, Bitcoin climbed from $16.6K in the first day of the year to $21.1K on January 17 — a whopping 57.22% increase.

Similarly, through the same time frame, miner revenue per TH/s went from $0.059 to $0.071 — rounding up a 20.33% growth.

You might be wondering, why did the correlation break around January 15, as you can see in the chart above.

The reason is the last difficulty adjustment. On January 15, Bitcoin mining difficulty reached a new all-time high, jumping 10.26%. This had a notable impact on mining profitability, which had reached $0.078 and fell almost a full cent.

The good news is that despite being brought down by the difficulty increase, miner revenue per TH/s is still high in comparison to its most recent levels.

What to expect from Bitcoin mining in the short term?

Most miners are profit-seeking. Therefore, it wouldn’t be surprising that we see hashrate further increasing now that profitability has risen.

In turn, that would lead to another consecutive difficulty increase, which would drive profitability further down. This is a natural dynamic between hashrate, difficulty, and profitability which ends up self-balancing after a few weeks.

However, we must also consider the possibility that Bitcoin enters a period of volatility. In such a scenario, price action would have significant impact in the industry: a more expensive Bitcoin would likely incentivize more miners to join the network, while the opposite would likely lead to many of them suspending their operation due to low profitability.

It’s hard to predict what will happen in the next few weeks, especially after the market changed trends so suddenly. One thing is for certain, however, and it’s that miners finally got that breath of fresh air they were needing so much.

Hopefully, it will last for much longer.