Many Bitcoin (BTC) miners went bankrupt last year. The largest public mine, Core Scientific. In 2022, not only did the price of Bitcoin drop drastically, but the energy costs also went up drastically and the hashrate increased due to huge competition. Luxor mining illustrates well how extreme the costs are for miners.
Energy prices have also increased in the US
Luxor Mining is the company behind the hashrate index, which tracks a large number of key features for Bitcoin miners. In Hashrate Index Q1-2023 Report Explain how Energy costs in the US affect crypto mining. Price differences between some states are huge. For example, in January 2023, you paid US$168 per megawatt hour (MWh) in California, while you paid only US$60 in nearby Idaho.
Also, prices increased from January 2022 to January 2023. California is a big country. Here costs have increased by around 22%. In some other states, such as Oklahoma, the price increase was only 5%. Unfortunately, Europe has been largely left out, although Luxor notes that the Dutch TTF index for natural gas rose nearly 400% from January to September.
Bitcoin hashrate rises due to competition
High energy prices are not the only obstacle. As the listed miners expanded their hashrate significantly, the hashrate also increased significantly. Some companies, such as Iris Energy, Cipher and TeraWulf, have doubled that. On average, public miners increased their capacity by 21% to 83 exahashes per second (EH/s).
In the US the cost is at least three times higher
So there are a lot of factors that play a role in the costs of miners. According to Luxor, costs are the lowest in New Mexico, where you pay USD 16,850 to mine 1 BTC. But in Hawaii it costs around USD 114,587. A big difference, but costs are higher now than they were a year ago. At that time, according to researchers, you only paid USD 5,000 to USD 10,000 for 1 new BTC.
@hashrateindex Makes a very important chart #Bitcoin Proves the Natural Asset Value (NAV). $BTC
Until the market validates Bitcoin’s value, price discovery begins with fair value -> cost of production -> proof of work pic.twitter.com/DgCaRz65YE
— CJK (@CJKonstantinos) April 29, 2023
But there is a positive side to this news. Luxor expects energy prices to fall again, which will again reduce costs for miners.
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