This week, mining difficulty jumped up 6%, while the Bitcoin network's hash rate exceeded 400 EH/s. This year alone, capacity increased by 50%.

For reference, mining difficulty adjusts to the total capacity such that the mining speed for one block (a block every 10 minutes) remains invariable. As such, if miners connect additional ASICs, mining difficulty increases. If they take equipment offline, it decreases.

As a result of the increased difficulty, competition in the mining market is heating up, and the average cost of mining increasingly exceeds Bitcoin's price. According to calculations by MacroMicro, the cost of mining is $36,000, while one BTC is worth $26,000.

The profit per hash power neared the record low of $0.057 that was reached in November 2022.

In these conditions, the majority of public miners are seeing losses, though production continues to grow. Riot Platforms' losses in Q2 amounted to $28 million. Nevertheless, the company plans to double its capacity in a year to 20 EH/s.

In long-term estimates, mining companies are guided by the underlying cyclical model and the expectation of an imminent reversal of the Fed's monetary policy. According to the mathematical model, Bitcoin will trade between $100 and $1 million by 2026.

Unfortunately, neither of these price points is guaranteed. Bitcoin doesn't have enough historical data to rely on four-year cycles for business decisions, and the Fed has already hinted that it may continue to raise its key interest rate in 2023.

If the unfavourable environment lasts, public miners will be in a tough situation. Even right now, most of them are forced to sell their mined coins to cover their operation expenses. Last year's leader, Core Scientific, is currently undergoing bankruptcy procedures. Things will take a sadder turn if the 2024 halving doesn't lead to an instant increase in Bitcoin's price. The halving of income at current prices and difficulty levels will force many players to leave the market for good.

StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)