Bitcoin's growth in 2023 encouraged miners to increase their output significantly. During this period, the average computational capacity jumped by 41% to reach 344 EH/s.

The capacity raising by miners cancelled out the positive effects of price growth. The issue is that the network automatically adjusts difficulty so that an average block creation time would reach 10 minutes. The additional computational capacities were compensated for by increased difficulty. As such, the average cost of mining one Bitcoin once again moved ahead of the coin's actual price. According to data from MacroMicro, the average mining cost now stands at $32,000.

The yield from one terahash of capacity is around the same level as in October last year when Bitcoin was trading at around $20,000.

The fierce competition is forcing miners to sell the coins they have mined. It seems that virtually every miner has forgotten the "mine and hold" strategy of 2021. Currently, their combined reserves are estimated at around 1.8 million BTC, which is around the same level as they were in November of 2021.

It's highly unlikely that miners will return to accumulation, and the competition in the market will only rise. We have written previously about TeraWulf, which managed to secure (possibly) the lowest tariff in the industry, $0.02 per kWh, on account of its direct connection to nuclear power. These kinds of moves will press other miners with a less effective business model. For example, No. 1 by computational capacity Core Scientific was unable to handle the competition and was forced to declare Chapter 11 bankruptcy last year.

As for Bitcoin, rising capacities are good news for the cryptocurrency. First of all, this increases the network's security. Second, it suggests coming inflows of new investment.

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