Bitcoin’s Rising Difficulty Squeezes Miner Profitability

The listed below is an excerpt from a current edition of Bitcoin Magazine Pro, Bitcoin Magazines premium markets newsletter. To be among the very first to receive these insights and other on-chain bitcoin market analysis directly to your inbox, subscribe now.Bitcoins newest trouble change was available in at 9.26% earlier today, its 2nd biggest increase this year behind 9.32% back in January. According to usual, the increase is a result of a rise in hash rate over the last two weeks driving faster block production times. Now both hash rate and trouble sit just listed below all-time high values. Hash rate is up 10.27% over the last thirty days. What seems the driving forces behind the hash rate boosts over the last of couple weeks are a few factors: larger public miners are getting more rigs plugged in which are in alignment with their 2022 expansion strategies; were getting past the hotter summer season, specifically in Texas where miners were temporarily closing down rigs per rewards from their purchase power arrangements; cost rallying to $25,000 will drive more hash online and less efficient rigs move hands to more efficient, competitive operations. Its challenging to measure which is the most impactful force, but all seem to be playing a function in hash rate growth. The Bitcoin mining problem increase is a result of a surge in hash rate over the last two weeksMultiple factors have likely been driving the Bitcoin hash rate in the last few weeks.To see this level of rise in difficulty this quickly is an unusual event and looks less sustainable than progressive rises in hash rate and problem weve seen in the past. The newest problem increase brings more pressures to miners profit margins at a time where we believe bitcoin cost has even more to fall. Hash cost continues its fall from its golden duration, down almost 17% over the last 30 days. If the increase in hash rate is mainly driven by prefinanced expansion strategies by major public miners, the hash rate boost isnt reflective of a continual boost in hash rate coming online on the margin. As you can see by the charts above, even a reversal in the brief term doesnt alter the long-term trend of an ever-increasing hash rate and increasing network difficulty.Hash price continues its fall from its golden duration, down almost 17% over the last 30 days.Weve formerly highlighted some analysis from Arcane Research that revealed significant public miners baseline bitcoin production cost (based solely on electricity prices) were around $6,000 to $10,000. You can check out more on that research by clicking the above link or reading “Bitcoin Hash Rate Plummets 17% From All-Time High.” We havent performed this analysis ourselves or triangulated the information, theres one price quote that points to an “all-in” bitcoin production expense across public miners to be closer to $27,600 in Q2 of this year. This cost would include basic expenses, upkeep, payroll, interest costs on impressive loans and other expenses beyond electricity.Even presuming that estimate might be heavily overemphasized due to the fact that we do not have insight into the quality or approach of the analysis, a bitcoin price hovering around $20,000 still puts major public miners on the ropes to accomplish success on each bitcoin mined..