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Bitcoin mining has hit a record high, and estimates of the future of bitcoin mining power

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Update time : 2022-12-02

Mining is at an all-time highAccording to shilianm.com, despite the long bear market, the global bitcoin mining hash rate continues to grow. Bitcoin miners are finding it no longer profitable to mine bitcoin. Rising energy prices, inflation and a looming recession have put many of these companies on the spot. Mining bitcoin has become increasingly difficult because crypto miners can no longer afford it. As a result, the hash value of the network is expected to fall because miners simply cannot make a profit, let alone recoup their costs. Because of the inability to accurately detect global computing power. The following are just estimates from block time calculations.

The bitcoin hash rate may be affected

Bitcoin mining difficulties and hashing rates both hit record highs in October. This is seen as good news because a higher hashing rate means a more secure network. However, things soon changed.

Bitcoin mining has hit an all-time high

More closures are likely as bitcoin mining is no longer profitable enough. It currently costs about $19,300 to mine a BTC, which is not feasible in the current economic climate. Over the past few months, some bitcoin miners have experienced several bouts of financial stress. Higher energy prices have also contributed to the mining slowdown, as have inflation and a looming global recession.

Meanwhile, shares of bitcoin mining companies are getting hammered. Hut8 is down 73% year-to-date (YTD), while Canaan is down 44%. Other big drops included 82 percent at Bitfarms, 73 percent at Riot Blockchain and 77 percent at Hive. Same goes for the Argo blockchain, down 90%. The industry-wide plunge in share prices makes clear how bear markets affect large bitcoin miners.

How does bitcoin mining change when the hash rate changes

After peaking at 11.8 minutes on October 25, block time accurately dropped to 8.3 minutes on October 31.

According to calculations, the average daily hash rate resulting in such a short blocking time would be just over 280 Eh/s, lower than on October 11. In addition, the October 31 block time seems to be an anomaly, since October 11, it has been consistently above 9 minutes and often above 10 minutes. As a result, October 31 was an unusual day in terms of bitcoin mining, with an unusually low average block time.

The block time is adjusted by the difficulty and updated every two weeks or so. The latest update was added on October 23, which just happened to increase the average block time. The latter should always be around 10 minutes. In September, the average block time was about 10.1 minutes, and in October it rose to 10.6 minutes. This means, paradoxically, that despite the bear market, persistent hashing records are not unusual at all. At this point, a further increase in difficulty in November even seems possible.

Computational power and difficulty

All of this inevitably translates into a continued decline in the profitability of bitcoin mining. It’s true that miners are paid in bitcoin, so if the market value of bitcoin falls, so must the real returns from mining. According to some estimates, the average bitcoin mining returns are now the lowest ever.

The lowest peak for this period occurred on October 22, when the price of BTC was just over $19,000 and the computing power was over 270 Eh/s. This combination caused earnings to plummet to $0.06 per Th/s per day. It is very strange that with such low returns, miners not only continue to mine, but even increase their computing power (the hash rate), thus also increasing their costs. But there could be an explanation.

Efficiency of mining equipment

Over the past few years, more efficient bitcoin mining machines have come onto the market. These machines were able to express much higher hash rates than their predecessors, but with similar power consumption. So their operating costs didn’t change, but the hash rate still increased. This may also be why the hash rate has continued to increase in recent months, even as the price of BTC continues to move sideways around $20,000.

Probably until May 2022, the increase in the hash rate was generated by the long wave of the 2021 bull market. In fact, between June and July, as BTC’s value fell sharply, it temporarily fell, and then began to rise again in August, when the price of bitcoin recovered slightly. However, it continued to rise in September and October, when the price of BTC continued to trade sideways near the $20,000 mark. The increase in computing power in the last two months really seems to be mainly due to the improved efficiency of the new machines, so if BTC’s price doesn’t fall further, it may also be true.

At the end

One might ask whether this calculation correctly takes into account efficiency gains, since it means lower costs and higher profits for the same hash table. If one properly considers the parameters related to the increased efficiency of mining machines, it follows that such low actual profitability indicates that miners clearly expect Bitcoin’s value to rise in the future. On the contrary, if they don’t fully consider this parameter, their estimate of current profitability may be wrong.

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