Bitcoin miners face significant challenges, reminiscent of late 2022 when the FTX exchange collapsed. Recent sell-offs by various governments and the Mt. Gox exchange have exacerbated the situation, making Bitcoin mining less profitable.
According to a July report from market research firm CryptoQuant, signs indicate that Bitcoin miners are “shutting down operations” as Bitcoin’s price fell 13% from $68,791 to $55,394 (as of July 8, 2024).
This downturn has forced miners to halt parts of their operations to cut costs and sell off some of their Bitcoin reserves to stay afloat until profits recover.
One key indicator highlighted by CryptoQuant is the decline in hash rate (the computational power of the blockchain network), which has dropped 7.5% to 576 EH/s, the lowest level since its peak on April 27.
“This situation mirrors December 2022, when the total network hash rate fell 7.7% following the FTX collapse. Such declines often precede market bottoms,” the report noted.
At the end of 2022, Bitcoin’s price was $15,500 per coin before surging over 300% in the following 15 months.
Since the fourth Bitcoin halving event in late April, miners’ income has also plummeted, as shown by the profit-to-loss ratio. Daily mining revenue has dropped 63% over the past two months due to decreased block rewards and increased transaction fees.
“Daily mining revenue was $79 million in early March but has now fallen to $29 million. Revenue from transaction fees makes up only 3.2% of the total daily income, the lowest since April 8,” the report added.
This has forced Bitcoin miners to dip into their reserves to make a profit. The miners’ sell-offs, along with those by whales and some governments, have caused Bitcoin’s price to plunge, hitting $53,499 on July 5, the lowest in four months.
Financial services firm Cantor Fitzgerald predicts that some of the world’s largest Bitcoin mining companies may shut down if Bitcoin’s price falls below $40,000 per coin.
