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Crypto Potato 2024-12-31 13:49:32

Bitcoin Mining Faces Rising Costs as Hashprice Boosts Provide Only Temporary Relief

The mining difficulty of Bitcoin hit a new peak of 109.78 trillion, climbing 1.16% in Sunday’s latest adjustment. This represents a 24% increase over the past 90 days and a 52% rise during the last three months of the year. Meanwhile, Bitcoin’s hash rate also crossed the 800 EH/s threshold this month for the first time, signaling the network’s solid performance. Despite these indicators of a strong network, miners face challenges due to the halved block rewards and increased difficulty, which squeeze their profitability. Temporary Relief But Cost Pressures Mount for Bitcoin Miners CoinShares’ Q3 Bitcoin Mining Report highlights that although these factors have raised mining costs, the recent rise in hashprice has provided temporary relief. However, this boost is not expected to last, and miners will need to adapt to the long-term pressures driven by rising costs and competition for resources. In its latest report, the European asset manager stated that cost-of-production pressures are expected to continue and will be driven by fierce competition for land and power resources. Hyperscalers, which offer more profitable alternatives, are outbidding miners and are ultimately driving up operational costs. Meanwhile, machine prices, closely correlated with Bitcoin’s value, are also set to increase thereby amplifying capital expenditures and depreciation expenses. Miners Explore AI and Clean Energy Solutions As a result, miners are adopting diverse strategies such as HODLing Bitcoin or exploring artificial intelligence (AI) partnerships, which may temporarily slow BTC production but open new revenue streams. CoinShares’s identified firms, like TeraWulf and Cipher, are well-positioned to capitalize on AI opportunities due to their strategic relationships with energy companies and significant investments in clean energy. However, the financial impact of these ventures may take time to materialize, the report stated. On the other hand, debt markets remain liquid and encourage miners to issue new debt even as rising interest expenses and risks of insolvency loom large. Public miners like Argo face heightened risks, particularly if Bitcoin prices dip. This is due to negative shareholder equity and limited fundraising options. Notably, the average cash cost of mining Bitcoin rose to almost $55,950 in Q3, a 13% increase from Q2, with total costs, including non-cash expenses, climbing to roughly $106,000. Companies like TeraWulf have emerged as low-cost leaders, aided by reduced debt expenses, while others, like Riot and Marathon, achieved quarter-over-quarter production growth. The post Bitcoin Mining Faces Rising Costs as Hashprice Boosts Provide Only Temporary Relief appeared first on CryptoPotato .

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