News hardware The fall of Bitcoin poses a major problem for miners.
In the wake of the Bitcoin price drop, investors aren’t the only ones at a loss. Indeed, more and more miners are showing signs of weakness…
Bitcoin increasingly hard to mine
As you surely know, Bitcoin requires a lot of energy to be mined.
The further we go in time, the greater the difficulty of mining on the bitcoin blockchain. Thus, while 19 million Bitcoins have been mined in 11 years, it is estimated that the last bitcoin will be mined around 2140 to reach the maximum cap of 21 million coins.
This increasing difficulty of the algorithm generates significant costs on the electricity spent and on the choice of equipment for mining (graphics cards, processor, ASIC, etc.). As a result, many miners are developing their infrastructure in such a way that they can sustainably mine Bitcoin.
Only all this at a cost and when bitcoin goes down it poses serious problems for private and institutional miners.
Bitcoin miners in loss
Miners, being the core of the Bitcoin blockchain, have proven to be strong in cryptocurrency custody before. Thus, their determination to save their bitcoin regardless of the price has earned them the famous term “hodl”, meaning that you have to keep Bitcoin at all costs.
But while miners are used to storing each mined Bitcoin preciously, some are showing signs of feverishness and rightly so…
Currently, bitcoin miners are said to be barely profitable or even at a slight loss. Indeed, the production cost of a Bitcoin (BTC) is around €20,000, its current market price.
Paradoxically, while it is not interesting to sell Bitcoin currently, we observe that miners are selling more than usual, certainly to cover the cost of their operations.
According to the statistical organization “Arcane research” there would be a significant increase in the sale of Bitcoin by institutional miners.
“In the first four months of 2022, state-owned mining companies sold 30% of their bitcoin production. Falling mining profitability forced these miners to increase their rate of sale to over 100% of their production in May. Conditions deteriorated in June, which means they’re probably selling even more. “Institutional miners only make up about 20% of Bitcoin’s hashrate, but studying their behavior can give some idea of what private miners do. explains Arcane research.
The objective being for some to refund the credits and the costs related to the equipment necessary to mine.
By significantly selling their Bitcoins, miners add selling pressure to the price of Bitcoin. When they are not selling, they prefer to turn off their machine to avoid incurring unnecessary costs.
These actions affect the “hashrate”, the unit of measurement indicating the computing power required for the Bitcoin network. Bad news for the price but also for Bitcoin users since when the hashrate drops, the Bitcoin blockchain is less efficient resulting in slower transactions.