The rate of return per hash rate is at its lowest point this year. It costs between USD 18,000 and USD 20,000 to generate just one bitcoin (BTC).
Bitcoin mining is not going through its best moment regarding profitability. The production cost of just one BTC is between USD 18,000 and USD 20,000 for small miners, while its market price dances around USD 21,000. This low profitability makes miners sell their BTC to cover their operating costs, and they would keep doing so if their returns wouldn’t evolve.
Research by Nikolaos Panigirtzoglou, an analyst at financial firm JP Morgan, highlights that publicly traded mining entities revealed massive sales between May and June of the BTC they held in hodl. This guild represents 20% of the whole current hash rate of Bitcoin.
According to Nikolaos, these BTC sales in previous months could harm the price of bitcoin, and there is a risk that this pressure may continue.
Bitcoin mining is facing its worst moment in profitability so far this year. The hash price, or cost for each tera hash would be USD 0.07, a minimum figure this year.
Even though this situation paints a desolate panorama, the most prominent Bitcoin mining farms significantly minimized their profitability. This reduction takes effect thanks to new equipment, which modulates the production cost to levels registered at USD 15,000, reaching even over eight thousand dollars, depending on the nature of the mining activities and the cost of energy that the farm uses.
The Sale of Bitcoins Would Make the Price Crumble
The BTC sell-off can cause a phenomenon usually called a death spiral or negative spiral. In this scenario, the holders start selling their digital assets to avoid getting harmed by the price drop. That, in turn, causes the price to keep crumbling down to lower levels.
If bitcoin were to suffer due to this situation, miners could be the main culprit, as miners, in parallel with mining pools, are historically vast hodlers of BTC.
It is worth noting that while bitcoin’s price may go into a kind of negative spiral, its technological fundamentals remain undamaged. It is still decentralized digital money without third parties. This situation makes it extremely unlikely that the price will experience a decline, as some of its detractors predict.
By: Jenson Nuñez