Bitcoin miners power up rigs again as market stages a rebound
BITCOIN miners are turning their machines back on as the digital asset heads for what could be its longest winning streak in a decade.
Mining difficulty, a measure of the total amount of computing power used to mint Bitcoin, soared by over 10 per cent in the two weeks ended on Sunday (Jan 15), data from crypto-mining website btc.com showed. The surge revealed that miners were plugging their computers back in to shore up revenue as Bitcoin rallies.
Since early last year, low coin prices and high energy costs have battered miners. Large-scale miners struggling to repay mounting debt are on the verge of bankruptcy.
The world’s largest cryptocurrency based on market value advanced 23 per cent in the seven days through Sunday, in its best weekly performance since February 2021. The token is also flirting with its longest winning streak since November 2013.
Miners use specialised computing facilities to secure the Bitcoin network, by validating transaction data on the blockchain and earning rewards in the form of the token. Public mining companies have raised billions of dollars to build out data centres and substations connected to power grids to scale up their energy-intensive operations. However, falling Bitcoin prices put pressure on mining revenue, and soaring electricity costs compressed miners’ profit margins in 2022.
The latest jump in rig power is the second-biggest increase since August 2021, according to btc.com. That follows a 13.5 per cent surge in early October 2022, as electricity costs declined due to a drop in temperatures in US crypto-mining hubs such as Texas.
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“With the recent improvement in both Bitcoin prices and weather-adjusted energy costs, curtailment among the large miners has decreased, leading to an all-time high in network hash rate,” said Matthew Schultz, executive chairman at crypto-mining company CleanSpark, referring to the measure of computer power on a blockchain network.
As more miners return to competing for a limited supply of rewards released from the Bitcoin blockchain, they will be faced with thinner margins in the near future if Bitcoin prices remain at current levels.
“The rising network difficulty offsets the gains in Bitcoin price, providing little benefit to hashing miners in this tough environment,” said Ethan Vera, chief operations officer at crypto-mining services firm Luxor Technologies.
In the meantime, Bitcoin’s rebound has put crypto-mining stocks on course for their best monthly performance in at least a year. An index that tracks 20 public miners is up more than 70 per cent so far in 2023. After last year’s drastic drop in prices, Bitcoin miner Bitfarms has seen a more than 140 per cent jump this month; Marathon Digital Holdings has also climbed over 130 per cent. BLOOMBERG
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