Bitcoin Mining Faces Challenges with Decreased Profitability

By: Eliza Bennet

Bitcoin Mining Difficulty Drops by Over 4%

On August 14, Bitcoin mining difficulty saw a significant decrease of more than 4%, according to data from Glassnode. This marks the seventh negative adjustment in 2024, bringing the current difficulty down to 86.87 trillion (T). The decline in difficulty reflects a drop in the network's hash rate which has been observed since late July.

The seven-day moving average hash rate has fallen to around 622 exahashes per second (EH/s) from its all-time high (ATH) of 670 EH/s. This decrease in mining difficulty coincides with a cycle-low in transaction fees, resulting in miners earning less than $500,000 per day. The combined effect of a relatively high hash rate, near-record difficulty, and minimal transaction fees is putting significant financial pressure on miners.

Profitability Challenges

Bob Burnett, CEO of Barefoot Mining, has highlighted the stress Bitcoin miners are facing, with the hash price hovering near its all-time lows at $43 per peta hash per second (PH/s). The hash price represents the expected value of 1 terahash per second (TH/s) of hashing power per day and confirms the current unprofitable conditions for miners in an increasingly challenging environment.

The recent report by Jefferies also points out that July was less profitable for Bitcoin miners compared to June. Moving into August, miners may face even more difficulties as the price of Bitcoin has dropped about 5%, and the network hash rate has started to grow again. This dual effect of falling Bitcoin prices and increasing network complexity serves to further exacerbate the financial woes of miners.

This downturn in mining economics could have long-term ramifications on the Bitcoin network, potentially driving smaller and less efficient miners out of the market. However, it could also lead to further decentralization as larger operations are forced to improve efficiency and innovate to stay competitive.

The present scenario prompts an examination of future trends in Bitcoin mining, particularly how technological advancements and energy-efficient practices could help miners navigate these turbulent times. The ongoing evolution of mining hardware and the increasing adoption of renewable energy sources may provide avenues for sustainable profitability.