The price of BTC approached the maximum production cost of 1 bitcoin. On November 11, 2024, the BTC price rose $8,343 in 24 hours, a historical record. 2024 has been a challenging year for Bitcoin (BTC) miners. Just as some important metrics for the sector, such as hashrate (network processing power) and network difficulty, have recently reached historical highs, the profitability of this activity decreased from July to October. These conditions denote a competitive environment with high operating costs. However, in recent days, some indicators suggest a possible change in trend, generating expectations of recovery for miners.
Same block subsidy, bigger rewards
Initially, given the bull run of bitcoin and most cryptocurrencies partly thanks to Donald Trump's victory in the US presidential election, miners' rewards are more valuable. The price of Bitcoin rose to and pierced all-time highs, reaching a value of up to $89,000. Yesterday, November 11, 2024, BitcoinDynamic reported a historic event regarding the price of BTC: the largest bullish movement ever recorded occurred, rising $8,343 in 24 hours. So that at a fixed rate per subsidy of 3,125 BTC (post halving of April 2024) it is around $275,000at the time of writing. To that figure must be added the amount miners take for the transaction fees paid by network users. An example of the improvement in mining profitability can be seen in the current most profitable ASIC (application specific integrated circuits) in Bitcoin mining. This Bitmain Antminer S21E XP Hyd 3U device, launched in November 2024, generated net income of approximately $12 per day until a few days ago, as reported by BitcoinDynamic. Today, with the price of BTC close to $90,000, that figure was close to doubling and reached almost $23 daily net. That is, miners who are implementing BTC mining with this ASIC will have almost doubled their income recently.
Miners approach the maximum production price of bitcoin
These mining companies would also have narrowed the margin between their rewards and the maximum cost of producing a bitcoin. A recent report from Coinshare, reported by BitcoinDynamic, noted that the average cost involved in putting the structure into operation to mine on the bitcoin network is around $96,000 per bitcoin. In this way, with the price of BTC approaching the maximum production pricethe miners whose production cost is so high, which is not all, see relief (and hope) that their profitability can grow if that margin is maintained in the coming days or weeks. However, as determined by the same report, there are some BTC mining companies, such as Cormint and Terawulf, that have a much lower average cost of bitcoin production, of $16,700 and $18,700. This is because Cormint uses a liquid cooling strategy and the use of energy managed by the company itself. For its part, TeraWulf, the lower cost is due to low electricity prices that are around 0.02 kW/h dollars (kilowatt per hour) and 0.04 kW/h dollars (kilowatt per hour) in its two facilities in the US This means that the profits of these two companies, following the BTC price rally in recent days, It was vastly higher than that of other miners.
Thus, expectations of a bull market drive interest in mining, as an increase in the projected price of Bitcoin improves long-term return expectations. The recent rise in the price of bitcoin has given a respite to miners, who see their profitability improve after a period of challenges and high operating costs. If this bullish trend continues and the BTC price reaches $100,000 or even higher, mining profitability could strengthen, allowing both large and small miners to operate with higher profit margins. However, with a higher BTC price, more people and institutions are likely to get involved in mining, which would increase the rate of hash from the network. Additionally, this would lead to an increase in mining difficulty. As more miners and teams join, the difficulty and hashrate rise, which would again reduce the profitability of the miners, unless the Bitcoin price continues to rise or at levels similar to the maximum production cost.