Bitcoin miners are feeling the pressure of mining costs. The spectacular expansion in 2021 attracted thousands of participants to mine or produce new coins. As a result, the hashrate, or computing power used by miners has nearly quadrupled in the last six months, surpassing 200 million ‘terahashes’ per second.
“Operating costs are a major factor in miners’ decision to hold or sell newly acquired coins. They are the first and most natural sellers in the crypto space and therefore definitely impact prices,” said Justin d’Anethan, director of Amber Group.
The total value of coins held in miners’ wallets dropped from US$114 billion (R$570 billion) to around US$75 billion (R$375 billion) in early November as their profitability was reduced by the increase in the hashrate. and falling prices, according to cryptocurrency research firm Arcane Research.
Miners are transferring more coins to exchanges than they are adding to reserves, according to cryptocurrency industry analysts, a sign of intent to sell.
These flows are adding to the pressures faced by bitcoin, which has seen a sell-off in global markets, driven by border tensions with Ukraine and tightening of Fed (Federal Reserve) policy.
The dominant cryptocurrency is trading at around US$37,000 (R$185), 40% below its November peak of US$62,000 (R$310).
Bitcoin mining is the process by which a computer network verifies and validates a block of transactions, which are added to the blockchain. Miners are rewarded for completing a block.
It’s an expensive business, requiring not only fancy equipment that costs more than $10,000, but also an enormous amount of energy. The seven-day average of the total mining cost per validated transaction has dropped to $176.8 (R$ 884), from a record of $ 235.57 (R$ 1,177) reached in May last year, data from blockchain.com.
The decline in mining profitability is hitting the broader market as some institutional investors, who are unable or unwilling to invest directly in cryptocurrencies, buy shares in listed miners or ETFs that track miners as an alternative to gaining access to the industry.
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