Bitcoin mining is facing a perplexing paradox as hash rate, a measure of computational power on the network, reaches new highs while mining revenue hits lows reminiscent of the FTX collapse in November 2022.
However, the past week witnessed a remarkable surge in Bitcoin’s network hash rate, soaring to 414 exahashes per second (EH/s) on August 18, establishing an all-time high. This surge represents a 54% increase from the beginning of 2023 and an 80% jump over the past year, as per data from Blockchain.com.
While the network’s security seems robust with this soaring hash rate, the picture for Bitcoin miners is a bit grim. Mining revenue has taken a sharp plunge, resembling levels observed during the market cycle’s nadir when Bitcoin’s value dipped to approximately $16,500 in November 2022.
Currently, revenue stands at a mere $0.060 per terahash per second per day, barely half of what it was in early May. This drop coincided with the frenzy surrounding the Bitcoin Ordinals inscription, which triggered a surge in demand for block space.
Dylan LeClair, a market analyst, shed light on this concerning decline in both revenue and the hash rate’s peak. LeClair predicted that while more efficient mining rigs will continue to be developed, it’s nearing a point where the price of Bitcoin needs to outpace these developments. In other words, the price of Bitcoin must rise to maintain profitability in the face of such high hash rates.
In efforts to weather the bear market storm, Bitcoin miners have reportedly been relying on funds generated through stock sales in the second quarter. Bloomberg reported that major publicly traded mining companies collectively raised around $440 million through stock sales in Q2.
Mark Jeftovic, the mind behind the Bitcoin Capitalist newsletter, provided insight into the situation, noting that some mining companies are excessively diluting their shareholders.
Mark emphasised the importance of aligning shareholder dilution rates with Bitcoin’s upward trajectory; otherwise, they risk heading in the wrong direction in this mining treadmill.
As the industry grapples with this complex interplay between hash rate highs and revenue lows, it remains to be seen how miners and the market will adjust to maintain profitability and navigate the evolving landscape of Bitcoin mining.