TL;DR
- The increase in Bitcoin production costs post-halving is causing concern among the mining community and investors.
- The average production cost of one BTC exceeds $77,000 USD, resulting in losses for miners of around $10,000 USD.
- There is concern about the centralization of the BTC network, as only large miners are able to survive the high production costs.
The rise in Bitcoin (BTC) production costs is raising serious concerns within the mining community and among cryptocurrency industry investors. Following the halving, which halved miners’ rewards, the costs associated with producing a single BTC have reached record levels, putting pressure on the profitability of mining the leading cryptocurrency.
Recent data shows that the average production cost of one Bitcoin has surpassed $77,000 USD, implying that miners are spending more on electricity than they earn from mining the cryptocurrency. Even with the current price of BTC hovering around $66,700 USD, miners face losses of around $10,000 USD for each BTC mined.
Welcome to a new paradigm.
Bitcoin Electrical Cost is now a whopping $77.4K.
This is the raw electricity cost to power the network, per Bitcoin mined.Bitcoin Miner Price hit $244K on Saturday!
This is the block reward + fees per Bitcoin mined. It boomed as transaction fees hit… pic.twitter.com/woF6utozmZ— Charles Edwards (@caprioleio) April 22, 2024
According to Capriole Investments, the estimated production cost reaches $128,989 USD per BTC. This directly implies that miners are incurring substantial losses of around $52,000 USD for each BTC issued.
High Bitcoin Production Costs Could Drive Network Centralization
The mining industry as a whole is facing a challenging situation. While some mining companies, such as Marathon Digital Holdings and Gryphon Digital Mining, have reported profits, most publicly traded mining companies have reported losses in their activities. In total, it is estimated that they have accumulated losses of around $1.27 billion USD, according to data from CompaniesMarketCap.
Another significant concern lies in the risk of centralization of the Bitcoin network. If production costs continue to exceed mining rewards. The network is likely to be concentrated in a few large miners, which could threaten decentralization and system security.
To prevent mining companies from closing and the centralization of the network. The price of Bitcoin must increase significantly to cover current production costs. However, this situation raises questions about the long-term viability of BTC mining and the need to find sustainable solutions to ensure the health and security of the network in the future.
