Bitcoin miners face uphill battle as margins drop

A picture taken on February 6, 2018 shows a visual representation of the digitalcurrencyBitcoin, at the Bitcoin Change shop in the Israeli city of Tel Aviv. JACK GUEZ AFP In late 2021 miners were the toast of the town with a surefire path to profit: hook powerful computers up to cheap power, crack fiendish maths puzzles and sell newly minted coins on the booming market.

Global revenue from mining of digital currency has dropped to US $17.2 million a day, according to data from Blockchain.com, down 72 percent from last November when miners were racking up US $62 million a day.

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Joe Burnett, head analyst at Blockware Solutions, said that miners have continued to watch margins compress, the price of bitcoin has fallen, mining difficulty has risen and energy prices have gone up.

That has put a lot of pressure on players who bought expensive mining machines or rigs and banked on rising bitcoin prices to recoup their investment.

Since August, the price of virtual currency has failed to break above US $25,000, reversing November's all-time high of US $69,000.

As more miners come online, the process of solving puzzles to mine token has become more difficult. This means they have to consume more computing power to increase operating costs, especially for those without long-term power pricing agreements.

Since July, the profit for a terahash per second of computing power has fluctuated between US $0.119 and US $0.070 a day, a decline from US $0.45 in November last year and around its lowest levels for two years.

The grim state of affairs could be here to stay, as Luxor's Hashrate Index, which measures mining revenue potential, has fallen almost 70 percent this year.

It's been painful for miners.

The shares of Marathon Digital, RiotBlockchain and Valkyrie Bitcoin MinersETF have fallen more than 60 percent this year, for example, while Compute North filed for bankruptcy last week.

But mining is ultimately a long-term proposition - the last bitcoin is expected to be mined in 2140, more than a century away - and there is a spy opportunity in the gloom.

The best time to get in is when the market is low, the same mining rigs that went for $10,000 earlier this year, you can get that for 50 percent to 75 percent off right now, said William Szamosszegi, CEO of Sazmining Inc.

Many miners are cutting back on buying rigs, forcing makers to cut prices.

The popular S 19 J Pro rig sold for US $10,100 in January on average, but now sells for US $3,200, analysts at Luxor said. The prices for bulk orders of mining machines had fallen by 10 percent in the past week.

Chris Kline, co-founder of theBitcoin IRA, said miners would have to focus on energy efficiency to bring costs down and avoid any repercussions from climate change related regulations.

He said that miners will look to stay afloat regardless of current market conditions by managing their balance sheet, processing units and energy costs.