According to the “DL News” report, due to the increasingly unstable cost of Bitcoin mining, it is now a turbulent time for miners. Hut 8, a listed mining company in Canada, hopes to maintain profitability by cutting costs and using special software.
According to the data from “Financial M Square”, the average cost of miners to produce each Bitcoin soared to $83,668 in early June, about 37% higher than the current price of about $61,000. Although mining costs have dropped sharply to $45,719 this week, it is likely to rise again.
Asher Genoot, CEO of Hut 8, stated in an interview with DL News, “Miners who have not reached a sufficient scale are likely to no longer be profitable in this environment. If they have not stopped mining, they will be forced to shut down.”
As more miners join the Bitcoin network, solving the complex equations that bring rewards becomes increasingly difficult. This mechanism may help explain the sharp fluctuations in mining costs, as unprofitable miners will shut down their machines. In addition, the Bitcoin network completed its fourth block reward halving in April of this year, which may affect the recent financial situation of miners.
The biggest operating cost for Bitcoin miners is energy. Many miners have locked in long-term contracts to withstand the volatility of the energy market.
Hut 8 stated that the company reduced operating expenses in the first quarter by stopping unprofitable production and initiating a budget review process for recurring expenses. According to Hut 8’s first-quarter financial report, the company’s average cost to produce each Bitcoin was $24,594.
Debt financing is also a major issue. In order to remain competitive, mining companies must regularly update equipment and adopt newer, more efficient models. To do this, they often raise debt to fund these purchases.
According to Genoot of Hut 8, the key to determining the miners’ profitability is an indicator called “hash price,” calculated based on the mining difficulty of the Bitcoin network, the Bitcoin price, and network rewards.
To assess profitability, miners look at the hash price relative to energy costs and the efficiency of mining machines. According to Genoot’s calculations, the current hash price is about $0.053. He stated that this means energy costs for miners need to be below $0.065 per kilowatt-hour to be profitable.
Closely monitoring the hash price is one way Hut 8 maintains profitability. Genoot stated that his company operates software on the mining machines, and when electricity prices exceed expected income, the machines will automatically shut down. This allows Hut 8 to mine profitably when it is feasible and further control costs, something that smaller operators cannot do.
Miners are not only concerned about whether their current operations are profitable, but they also need to plan for possible future scenarios. The cost of Bitcoin mining is directly related to network hash rate – the total computing power of all Bitcoin mining machines, and the amount of Bitcoin produced by miners is usually consistent with their contribution to the hash rate.
Related articles: “JPMorgan: Market value of US-listed Bitcoin mining companies reached a record $22.8 billion in June” “Miners cash out and transfer the amount of coins to exchanges to reach a two-month high during Bitcoin rebound” “ViaBTC: Innovative applications of Bitcoin are the key to solving mining subsidy issues”
