Coinshares' Q3 mining report, led by researcher James Butterfill, highlights rising costs and challenges impacting the bitcoin mining industry in 2024.

How Bitcoin mining giants are struggling with rising prices

Coinshares' Q3 mining report, with research led by James Butterfill, reveals that bitcoin mining costs are rising, estimated to reach $49,500 per bitcoin (BTC) when considering only cash costs. Including additional costs such as depreciation and stock-based compensation, the average production cost is $96,100. This high-cost environment stems from increased mining difficulty and infrastructure expansion, all contributing to rising expenditures.

Note on Butterfill:

Nevertheless, mining companies continue to deploy new infrastructure and commit to further expansion, anticipating price increases in the future.

A significant barrier raised by Coinshares is the limited access to financial options, exacerbated by rising interest rates and reduced credit availability following recent disruptions in the cryptocurrency market. Many miners have had to issue shares to fund operations, a move that dilutes shareholder value.

Butterfill's report also notes the correlation between bitcoin price volatility and the stocks of mining companies; however, while bitcoin prices have risen due to the development of bitcoin ETFs in the United States, the stocks of mining companies have yet to fully capitalize on this increase.

Butterfill stated, “Recently, the prices of listed mining companies have closely followed bitcoin prices; however, they missed out on a significant increase earlier this year as they did not benefit from the launch of spot bitcoin ETFs in the U.S. that boosted bitcoin prices.”

Coinshares' analysis predicts sustainable growth in bitcoin hashrate, a measure of mining efficiency, expecting it to rise from the current 684 exahash per second to 765 exahash by the end of the year. Butterfill's team utilizes a unique model that considers the constraints of stranded gas as an energy source, hypothesizing that miners could ultimately reach energy saturation by 2050. If this occurs, Coinshares anticipates that carbon emissions could decrease by 63% as miners shift to converting gas into usable energy.

Coinshares' profit forecast further indicates that under current market conditions, direct investment in bitcoin may yield higher returns than bitcoin mining. Butterfill's report advises miners to diversify revenue sources, such as investing in artificial intelligence (AI) technology, as additional miner fee revenue may struggle to meet profit targets. Coinshares concludes that to maintain competitiveness in the mining sector, efficiency and cost management will be critical factors.
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