Rising Hash Rate and Mining Difficulty
The Bitcoin (BTC) network continues to grow stronger despite recent price fluctuations. According to data from Blockchain.com, the hash rate of the Bitcoin network reached a new all-time high of 414 exahashes per second (EH/s) on August 17. This marks a significant increase from the mid-2021 crypto market rally, where the network registered 84.8 EH/s, showcasing a growth of over 4.8 times.
In addition to the hash rate, the network’s difficulty gauge also hit a new peak. The difficulty rate adjusts automatically based on miner activity to maintain a consistent block time of 10 minutes. On August 22, the mining difficulty increased by 6.17% to reach an all-time high of 55.62 trillion hashes.
Challenges Faced by Mining Outfits
Despite the positive growth of the Bitcoin network, mining outfits are facing challenges to sustain their operations. The cost to operate mining equipment has risen, while the price of BTC remains stagnant. Cambridge University and MacroMicro analysis revealed that the average cost to mine a single BTC on August 27 was $45,877, compared to the spot price of $26,089. This represents a loss of $19,588 per BTC mined.
Mining revenue has also been affected, with earnings dropping to $0.060 per terahash per second per day. This decline is attributed to the decreased demand for block space that followed the Bitcoin Ordinals inscription frenzy in early May.
Financial Performance of Mining Companies
Publicly traded Bitcoin mining companies have experienced significant losses over the past 12 months. With a total combined loss of $4.47 billion, companies like Core Scientific, Marathon Digital, and Riot Blockchain have faced financial difficulties. Only one company, Canaan, recorded positive earnings of $62.33 million during this period.
To sustain their operations during the bear market, mining companies have relied on funds from stock sales. In Q2, these companies raised approximately $440 million through stock sales, a 60% increase compared to the previous quarter.
BlackRock’s Involvement
Bitcoin miners’ struggles have not only affected retail investors but also institutional investors like BlackRock. The investment firm holds significant shares in five underperforming mining companies, including Riot Blockchain and Marathon Digital. In total, BlackRock invested $411.54 million in crypto mining companies, accounting for 0.35% of the firm’s assets under management.
