Bitcoin prices have they continued to hold close to $20,000 this past week, but some miners are collapsing as prices spiking power and historically low hash rates cut into profits.
Although the price of bitcoin has been falling for a long time and has fallen about 56% year to date, the dominoes started to fall for bitcoin miners. What drives the implosion?
“There are many different issues at play. Obviously a global recession is coming, on top of inflation and rising electricity prices,” Christopher Perceptions, founder of PerceptForm and CEO of NoCodeClarity (no-code web3 apps), told TechCrunch.
“Miners are struggling for a lot of reasons right now,” Nick Hansen, CEO of crypto-mining firm Luxor, told TechCrunch. “We’re seeing a historically low hash rate, which means miners’ profits are at an all-time low.”
Hash price is a metric to determine the market price for each unit of hashing power, which is determined by changes in bitcoin mining difficulty (currently high) and the value of the cryptocurrency.
The hash rate is close to a historic low, according to data from the Hashrate Index, Luxor’s bitcoin mining data analytics. The current hash price is around $70.72, down 80.5% from $361.82 on the same day last year.
In addition, energy prices have risen across many markets, meaning miners’ costs are at an all-time high, Hansen said.
At a higher level, the higher the hash rate, the greater the difficulty in mining bitcoin – meaning it takes more electricity to do so, Perceptions said. “If the price of electricity is high, it becomes difficult to make a profit.”