Simply put
- Bitcoin dropped below $63,000 on Thursday, with mining costs estimated between $60,000 and $80,000.
- Public miners face production costs ranging from $39,000 (Iris Energy) to $106,000 (NYDIG) per BTC.
- The recent market downturn resulted in over $2 billion in liquidations within the last day.
Bitcoin prices have decreased by 50% since their highs in October, and they could soon dip below, or may already be below, what some miners require to produce the asset.
In the past 24 hours, Bitcoin’s value plummeted by 14%, recently crossing below that $63,000 mark. A BTC analysis platform indicates the difficulty regression price is currently at $86,000, definitely above what Bitcoin is trading for now.
However, relying on this as a measure for average mining costs can be misleading, according to Julio Moreno, head of research at CryptoQuant.
He mentioned, “That graph is an indirect estimate of mining costs based on a regression of price and mining difficulty, not a direct estimate from actual power costs, hardware efficiency, labor costs, etc.”
Moreno also pointed out that this chart may slightly overestimate miners’ actual costs, which he believes to be in the $70,000 to $80,000 range—still eclipsing Bitcoin’s current trading price.
Nishant Sharma, Founder and Partner at BlocksBridge Consulting, emphasized the simplicity of calculations regarding production costs. He noted that for publicly traded miners, statistics are usually shared in quarterly earnings reports.
“The reality is that miners’ costs vary significantly depending on factors like power prices, operating hours, and the type of equipment used,” he said.
Typically, larger firms tend to have lower production expenses. Presently, BlocksBridge estimates a median cost of $60,000, falling below Bitcoin’s current value.
NYDIG is expanding its mining capacity, with some operations reporting costs exceeding $106,000 per BTC mined. In contrast, Iris Energy benefits from competitive energy deals and has the lowest cost at about $39,208 per BTC.
This ongoing analysis draws from Bitcoin miners’ Q3 earnings reports while stakeholders await updated metrics. Significant firms like Riot Platform and MARA Holdings are expected to release fourth-quarter earnings soon.
Both Sharma and Moreno project that actual mining costs may be below $86,000, but with Bitcoin’s swift decline, many miners might soon find themselves in a challenging position.
When prices approach production costs, Sharma suggests a few outcomes. “Higher-cost miners are likely to scale back or even cease operations, leading to slowed hash rate growth,” he noted. There might also be consolidations, with stronger miners acquiring assets from weaker firms.
Miners are preparing for Bitcoin mining difficulty adjustments, set to take effect on February 7th. As of Thursday afternoon, estimates indicate a 13% reduction in difficulty.
At the time of this writing, Bitcoin was trading at $62,510, experiencing a 4% drop in the past hour. According to CoinGecko, it’s down more than 25% from the previous week, having peaked at over $126,000 last October.
Due to this sudden decline, more than $2 billion worth of cryptocurrency was liquidated, particularly in Bitcoin derivatives, which alone accounted for $1.11 billion. The largest single liquidation was a $12 million Bitcoin contract on Binance.
