Bitcoin miners are facing mounting pressures due to escalating hash rates and high energy costs, leading them to send more BTC to centralized exchanges, a move that could potentially put more downward pressure on prices. This trend was highlighted by crypto analyst Miles Deutscher on Thursday.
The total hash rate, which measures the processing power of the Bitcoin network, reached an all-time high of 425 EH/s (exahashes per second) last week, representing a 68% increase since the beginning of the year, according to Blockchain.com. Network difficulty, another metric indicating the competitiveness of Bitcoin mining, has also risen by 63% this year to an all-time high of 57T.
These factors have made Bitcoin mining increasingly competitive and intensive, resulting in decreased profitability. The hash price has dropped to $0.06 per terahash per second per day, according to the Hashrate Index. In comparison, during the bull market peak, it was $0.40/TH/s/day, marking an 85% slump in mining profitability.
In light of these challenges, Bitcoin miners may be driven to sell their holdings to accumulate capital. Glassnode data indicates that record amounts of Bitcoin are being sent to exchanges from miners. This trend is already starting to happen as miners struggle with high operational costs and decreasing rewards due to the upcoming halving event.
Despite these challenges, there are some positive developments in the Bitcoin mining industry. A recent KPMG report highlighted the increasing use of renewable energy in Bitcoin mining, improving its environmental, social, and governance (ESG) properties. However, this shift may not be enough to offset the immediate financial pressures faced by miners.
Bitcoin's price has also been fluctuating this year, failing to breach resistance above $30K three times and falling back to around $26K. This price volatility adds another layer of uncertainty for miners who are considering selling their holdings.
The selling pressure from miners is an internal headwind for Bitcoin, adding to the external factors that frequently steer its course. The broader market dynamics of Bitcoin will continue to be influenced by a variety of factors, including regulatory developments, market sentiment, and the potential approval of a spot BTC Exchange Traded Fund (ETF). As of now, Bitcoin trades at $26,828 with a market cap of $523.9 billion.
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