Mining Bitcoin Profitably Has Never Been Harder

The below is a direct excerpt of Marty’s Bent Issue #1275: “Miners are in a world of hurt.”Sign up for the newsletter here.

The pain in the mining world continues as hash rate skyrockets, the difficulty adjusting upwards as a result and hash price craters as the price of bitcoin has remained in a tight range between approximately $18,000 and $20,000 for more than six weeks. After yesterday’s upward difficulty adjustment of 3.4%, hash price fell to $0.055, according to Braiins Insights. This is the lowest it has been in the ASIC era.

Let’s put this into perspective by highlighting the profitability of different ASIC models mining at an all-in electricity cost of $0.06, $0.08 and $0.10 per kWh.

As you can see, at an all-in cost of $0.06/kWh, most ASIC models are profitable, though not very. If you’re running S9s, M21s or M20s, you are currently mining at a loss. Now let’s check out how this looks when we bump up the cost of electricity by $0.02/kWh.

Four more ASIC models get driven into unprofitable territory with the S19 and M30s+ scraping by with $0.01 and $0.05 of daily profit, respectively — unless you’re running Braiins OS+ firmware on the S19, in which case you’d be netting $0.50 per day in profit. The pain is starting to get nauseating. Now let’s bump it up to the all-in cost of $0.10/kWh.

This is what we in the business refer to as an “absolute bloodbath.” The only miner that is profitable outside of an S19 Pro running Braiins OS+ is the S19 XP — the newest, most efficient and highest-hashing model on the market. If you are running any other model, you are currently in the process of bleeding money. Not a situation anyone wants to be in.

If I had to guess based on my knowledge of the mining industry and the electricity rates I have come across while interacting with other miners in the space over the course of this year, I would wager that there is a significant amount of hash rate plugged into power sources that are charging $0.07 to $0.10/kWh. Miners are either barely getting by or hemorrhaging money at the moment. The pain is real.

Just last week Core Scientific raised their electricity rates for their hosting customers to about $0.10/kWh.

Every single miner hosting with Core Scientific who isn’t running an S19 XP or an S19 Pro with Braiins OS+ firmware is currently mining at a loss. According to its most recent monthly update, the company self-mines 13 EH/s produced by roughly 130,000 ASICs and hosts 102,000 ASICs producing 9.5 EH/s. I think it’s safe to say that most of these machines aren’t S19 XPs considering they just started deploying that model in July 2022. With that being said, Core Scientific’s self-hosted miners are probably mining at lower than $0.10/kWh considering they own the power purchase agreement and are likely mining at cost while charging hosting customers a higher rate to produce a margin for their business. Still, this is not an ideal environment for Core Scientific or any other miner with an all-in electricity cost above $0.06/kWh.

This all begs the question, “Why the hell is the hash rate still screaming?”

From what I have heard, a lot of projects that have been in development for well over a year in Texas just got electrified at the beginning of the month. These teams spent tens of millions of dollars in infrastructure costs and went through the administrative troubles that come with connecting to ERCOT. They weren’t going to reach the finish line and not turn on their ASICs. As it stands today, the mining industry seems to be caught in a game of “who can hold their breath the longest.” How long can these market conditions continue without countless miners having to turn off their machines so they stop losing money, or worse file for bankruptcy?

Compute North was the first domino to fall almost a month ago when they filed for bankruptcy. Your Uncle Marty expects them to be the first of many unless the price rips or some on-grid mega mine has a critical error that turns their machines off. Neither situation is what you want to be banking your business on if you’re a bitcoin miner.

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