Bitcoin mining performance in 2022 demonstrates the coin's "resilience," according to a new analysis from mining company Luxor.

Unprofitable mining

2022 became an extremely unprofitable year for miners of the first cryptocurrency. It is noteworthy that a year earlier the market was on an unprecedented rise. At that time, many new players appeared in the industry and attracted additional finance. This became a serious catalyst for the growth of Bitcoin and most popular altcoins with large capitalization. Of course, the arrival of institutional investors played no small role in this. But, as in any other market, significant growth is always followed by a correction, and sometimes a decline.

Last year turned out to be difficult for Bitcoin mining, primarily due to the downward trend. The bear market led to the fact that the hash price (“hashprice” - an indicator of expected income per day per 1 Th/s of capacity) was at the very bottom, and many miners suffered losses or went bankrupt. Despite this, the overall hashrate has grown by 41%, and mining the first cryptocurrency brings relative profit even in comparison with the three previous years.

Luxor specialists presented an extended analytical review of the mining industry and the cryptocurrency market entitled “Hashrate Index 2022 Bitcoin Mining Year in Review”. The report covers all these topics and many more in more detail. But the key aspect that is paid attention to in the review is the hashrate level.

Analysis of network indicators

Although 2022 was characterized by many challenges for the mining industry: from the lowest hash price to a number of high-profile bankruptcies of individual companies and even a snow storm in the United States, which affected the decrease in the total computing power on the network, hashrate still increased. Moreover, much more than in 2021 after the negative news background associated with the ban on mining and circulation of digital currency in China.

In general, it is interesting to follow the dynamics of the hash price. The maximum of this indicator was recorded on January 1 and amounted to $246.86/PH per day. Since then there has been only a decline. It is noteworthy that the lowest hash price of $55.94/PH per day was recorded already this year. Thus, there is a direct correlation between the decrease in the hash price and the decrease in BTC quotes, but the decrease in the hash price was proportionally higher.

According to the Luxor report, one of the factors influencing this was the increase in electricity tariffs in the United States. The United States of America still remains the leader in BTC mining, and therefore changes in electricity tariffs in the country may also affect the dynamics of the overall hashrate. However, many states were not affected by the cost increase because they had their own large sources of electricity production. All this led to the fact that in some states some players gained an advantage and continued to mine cryptocurrency.

The report also emphasizes that miners, due to the specifics of their activities, can use different flexible “energy strategies” and even temporarily interrupt the Bitcoin mining process with relatively moderate negative consequences for themselves. Some of these strategies are based on calibrated regulation of electricity consumption based on market signals. This was clearly demonstrated in Texas when miners paused their operations and, without wasting any extra electricity, ended up earning almost the same as if they had continued mining.

Thus, during the current crypto winter, many of those who mine cryptocurrency have clearly demonstrated that they are able to “survive” even during a period of depreciation and long-term decline in quotations. Moreover, unlike past crypto winters, creditors are more willing to make concessions and continue to sponsor industry companies (for example, offering debt restructuring as in the case of Greenidge Generation). All this can be considered as a positive signal for the market and the conviction of a number of investors that the trend will soon change.

The hashrate index https://bits.media/hashrate/bitcoin/ also indirectly indicates an increase in costs on the part of miners. According to Luxor, until 2022, consumption cost about $0.05-0.06 per kilowatt-hour. But now anything below $0.075 per kilowatt hour looks like “electricity theft” given current market conditions.

ASIC

Since the beginning of January, contrary to the forecasts of crypto-skeptics, an upward trend has emerged in the market, and large Bitcoin miners began to invest even more money, buying new equipment and expanding their enterprises. This was facilitated by the fall in prices for ASIC miners during 2022. Record high prices for equipment were recorded back in 2021, but as quotes fell, prices also fell.

In 2022, some major players suffered serious financial damage amid a bearish trend. Giants such as Core Scientific suffered maximum losses. But while some companies went bankrupt, others managed to increase their computing power. Sometimes through sales of ASICs on the secondary market by less efficient players. Ultimately, the events of the crypto winter did not particularly affect the stability of the Bitcoin network. As a result, large miners increased their total hashrate. Moreover, this indicator showed growth throughout 2022.

Conclusion

The report shows the “resilience of Bitcoin” against the backdrop of the challenges it faced last year. Macroeconomic pressure, natural anomalies, and even high volatility in the shares of some companies (and in some cases, their bankruptcy) were unable to prevent a significant increase in the network hashrate. This material and the information contained herein do not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.