Crypto news: while the price of Bitcoin loses the key level of $57,000, the general outlook of the mining sector becomes more complicated: how is the hashrate responding?
If until a few months ago we could count on profitable Bitcoin mining, with revenues increased by the Ordinals trend, now the first difficulties are emerging.
Bitcoin hashrate, network fee peaks, and new cryptographic incentives make the whole situation more tangled than it is by nature.
Pressures are growing among the large companies in this industry to accumulate as much computational power as possible, in view of the next bull market.
Let’s take stock of the situation in this article.
Crypto news: hashrate and on-chain metrics of Bitcoin mining
Analyzing the on-chain metrics of the crypto mining sector, the first thing that stands out is the recent reduction of Bitcoin’s hash-rate.
This indicator, which shows the sum of the computational energy embedded around the Bitcoin network, has been in downtrend since late May.
In particular from its all-time high it has lost about 7% reaching 574.9 EH/s, according to Blockchain.com
This is a first sign of weakness in the mining industry, where operators suffer from the uncertainty of the price of Bitcoin and start to turn off the machines.
This is a rare situation: in fact, the network’s ahashrate had not experienced a similar downsizing phase since November 2022.
In a similar context, to overcome this obstacle some miners are trying to improve their energy efficiency.
Coin Metrics has indeed observed how recently the Canadian BitFarms has made impressive improvements to the fleet’s efficiency, reducing incremental energy consumption from 35 to 27 J / TH in 2024.
In parallel, we can observe how the metrics of new addresses and active addresses on Bitcoin are also in a phase of decline.
From October 2023 onwards, while the main crypto of the market was beginning its price ascent phase, these two indicators were about to lose momentum.
As of today, on a weekly basis, we count 750,000 active addresses and 300,000 new addresses.
These numbers so low have not been seen since the end of 2018 and the beginning of 2019, when Bitcoin was worth just 3,500 dollars.
Crypto news: increase in revenues from mining at the beginning of June, but the hashrate situation remains difficult
The drop in Bitcoin hashrate is nothing more than a consequence of the reduction in revenue for those involved in the crypto mining sector.
In April, with the arrival of the halving of the network, the miners saw their revenues from the block reward cut in half.
Observing the “Bitcoin miner Revenue Per TH/s” chart by The Block, we can easily see the drop near April.
From the value of 0.11 dollars per TH/s of computational power, we have dropped below 0.05 dollars per TH/s.
Overcome the four-year obstacle of the halving, which still brings structural benefits to the network, there was a brief recovery phase.
In the early days of June, in fact, as reported by Coin Metrics, there was a recovery in mining revenue up to 0.065 dollars per TH/s.
This brief rise is attributable to a recent UTXO consolidation by the exchange OKX which has increased the fees for miners.
As explained by Coin Metrics:
“since BTC transactions are evaluated based on the block space they consume, transactions involving many UTXOs are more expensive to transfer”
This scenario has led the miners to cash in a good 38 million dollars in fees in just 3 days. Generally, in the same period of time, the fees hover around 1-2 million dollars.
The experts have emphasized how OKX, the fourth largest exchange in the world by spot BTC volumes, could have managed the cleaning of the accounting books more efficiently, without advancing thousands of transactions.
By doing so, however, it has given a positive boost to the crypto mining industry, which is currently facing a difficult situation.
Crypto miners are reinventing themselves and launching into other parallel businesses
The latest peak in the revenue of crypto miners, for which the OKX exchange is responsible, is not enough to guarantee economic stability for the operators.
In fact, parallelamente a quanto accaduto a marzo con l’aumento delle fees per le inscriptions Ordinals, queste condizioni non durano a lungo.
After the weight of the halving, moreover, the miners have been under strong pressure due to a stagnant BTC price.
At this moment, the prices of extraction devices are in sharp decline, indicating a sector in economic crisis.
Coin Metrics highlighted how the Antminer S19s at the end of 2021 was traded around 100 dollars per TH, while now it is valued at 2.5 dollars per TH.
In general, all Bitcoin ASIC hardware is valued at the lowest levels of the last two years, as shown by the following chart from The Block.
Many miners, to face these arduous challenges, are reinventing themselves by offering services similar to that of protecting the Bitcoin network.
In the wake of the artificial intelligence trend, some operators are offering themselves as providers of generalized infrastructure in an attempt to secure hosting contracts for AI applications.
In the meantime, the same miners are trying to continuously improve the efficiency of their machines by evaluating new purchases.
As reported by Coin Metrics, the process of increasing chip efficiency:
“continues relentlessly, forcing miners to consider whether to proceed with aging ASIC hardware or perform complete fleet upgrades.”
We will see if the third quarter of 2024 will offer new opportunities to the mining sector, while now we try to grit our teeth and weather the storm
Almost half of the revenues from the last quarter come from the shares of April, while May and June were not very profitable months.
Price situation for crypto mining companies: MARA, CLSK and RIOT
The constant pressures and new challenges in the revenue of miners bring uncertainty also in the quotations of the shares of crypto mining companies.
After the halving in April, most publicly traded mining companies have vaguely moved sideways alongside BTC.
Focusing on three stocks in particular, Marathon Digital (MARA), CleanSpark (CLSK), & Riot Platforms (RIOT), we notice how all have struggled to outperform BTC.
In the second quarter, in fact, only MARA managed to achieve a small positive return.
The prices of this stock remain stable around 20 dollars, with few timid attempts of an upward attack by the bull.
RIOT and CLSK, on the other hand, have experienced a phase of price distribution in the last quarter, with losses of around 20% from the top in April.
It is clear that with such an uncertain outlook for the speculative Bitcoin market and the on-chain metrics of the network, even the mining companies are suffering.
Usually, however, when the bull market resumes, the prices of these stocks experience a more dynamic and aggressive price action.
For example, CLSK from October 2023 to April has grown by about 500%, heavily outperforming BTC.
Riot unlike the other two companies has grown less during the bull phases of BTC, with very positive price evolutions nonetheless.
In the last year of trading on the market, the price of RIOT has remained trapped within the trading range of 9-20 dollars.
The Texan mining company could grow significantly in July/August, when energy incentives will increase significantly.
The ERCOT of Texas, that is the company responsible for managing the Texan electrical grid, offers miners like Riot energy credits to turn off their machines during the hottest hours of summer.
The missed profit from mining extraction is compensated precisely by these credits, which sometimes end up offering an enormously boosted revenue.
In fact, last year, during the hottest months, the “Demand Response” strategy significantly increased the earnings of the cryptographic company. As a result, the price of RIOT doubled in a few weeks.