Bitcoin’s Decline and Rising Difficulty
Bitcoin’s value dropped over 30% from its peak, while mining difficulty surged by 10.5% in the last adjustment. Public mining companies now face significant challenges.
Mining Complexity and Market Impact
Mining difficulty adjusts every two weeks based on total network power, ensuring a block is mined every 10 minutes. On July 31, difficulty jumped by 10.5%, the largest increase since October 2022. Concurrently, Bitcoin’s price corrected to $49,000 by August 5.
Profitability Challenges for Miners
Despite a partial recovery, profitability remains low at $41 per petahash per day. According to CryptoQuant’s CEO, Ki Young Ju, current mining profitability suggests an average production cost of $43,000 per Bitcoin. This estimate, based on Marathon Digital’s Q2 figures, doesn’t account for loan repayments or administrative expenses.
Financial Struggles of Major Miners
TheMinerMag calculated July’s mining costs, including all associated expenses, for major companies like Marathon and Riot. Both operate at a loss, reflecting the impact of rising difficulty and decreased revenue post-halving.
Strategic Accumulation and Future Outlook
Despite losses, Marathon and Riot continue accumulating Bitcoin, betting on a future price surge to restore profitability. Core Scientific previously adopted a similar strategy but declared bankruptcy during the subsequent bear market.
Investment Considerations
These figures prompt a critical question: Is it wiser to invest in mining companies or directly in Bitcoin?
