Bitcoin Mining Costs Surge Post-Halving, Industry Faces Major Challenges

The average cost of mining one Bitcoin has skyrocketed to $74,600 following the latest halving event, which briefly spiked costs to $94,320. This surge has forced some mining equipment to shut down, rendering only large companies with significant financial reserves or access to cheap electricity profitable.

The 2024 Bitcoin halving has halved the block reward from 6.25 BTC to 3.125 BTC, effectively doubling the production cost of each Bitcoin to approximately $30,000. This significant increase has strained miners, especially smaller operations. Glassnode reported unprecedented competition among miners, with the network hashrate reaching record highs, further complicating profitability at current Bitcoin price levels.

Miners are diversifying their business models and upgrading their facilities to survive. CleanSpark Inc. has reported outperforming industry expectations post-halving by achieving new efficiency milestones and increasing their hashrate to nearly 18 exahashes per second. They continue to expand and upgrade their operations, demonstrating resilience amidst rising costs.

The halving has also led to a decline in the Bitcoin network’s hashrate. This decline, delayed by a temporary surge in transaction fees, has forced unprofitable miners to exit the network, reducing overall production costs.

The environmental impact of Bitcoin mining remains a significant concern. The process is power-intensive and contributes to pollution in various U.S. communities. A recent report by the Environmental Working Group highlights the extensive environmental damage caused by Bitcoin mining in states like Georgia, North Carolina, and New York.

The Bitcoin network initially performed better than expected post-halving due to the launch of the Runes protocol, which kept transaction fees high. However, daily mining revenue dropped from $70M to $30M in early May due to a decline in transactions. This decline forced less efficient miners to shut down, further decreasing the hashrate​

Despite these challenges, the Bitcoin mining industry is adapting. The halving event is anticipated to catalyze further industry restructuring, with large-scale miners likely to dominate due to economies of scale and investments in energy-efficient technologies. The sector is moving toward more sustainable energy sources, driven by economic incentives and regulatory pressures.