Before the halving, the profitability of bitcoin miners collapses

The big players in the mining industry have had a chaotic stock market run lately.

Negative signs are multiplying around mining, which is becoming an increasingly unprofitable activity. Indeed, the sector’s big names have had a chaotic stock market run lately. Industry giants Hut 8 and Riot Platform saw their shares fall by 20 to 30% over one month. This, even though bitcoin has been experiencing turbulence in recent days, the queen of cryptocurrencies has gained more than 60% since the start of the year.

However, the profitability of miners is shrinking dramatically. It is measured in dollars per hash rate, the process of hard mining of bitcoin. It fell to 10 cents per day for 1 hash rate, compared to 40 cents in 2021. In 2017 it was a little more than 2 dollars and even 3 dollars in 2015. This tells you if the rise in power and strong demand has pulverized miners’ margins, forcing them to review their business model.

Soaring energy costs

Not to mention soaring energy costs. Right now, miners have another wave of rising oil prices to deal with. All this while in two days the bitcoin halving will take place. There, we find ourselves with a real economic weight for all these companies which are having difficulty finding cruising speed.

As a reminder, halving takes place approximately every four years and more precisely every 210,000 blocks validated on the Bitcoin blockchain. This is a halving of the number of bitcoins issued to the market as miner rewards.

Upon validation of a block which takes place approximately every 10 minutes, new bitcoins are given as a reward to miners. Over the last 3 halvings, the number of bitcoins distributed to each miner has been halved, from 50 to 25 bitcoins in 2012, then from 25 to 12.5 bitcoins in 2016 and finally from 12.5 to 6.25 bitcoins in 2020. In April 2024, the number of bitcoins distributed to each miner will increase from 6.25 to 3.125 bitcoins.