It was an even better quarter for Bitcoin miners in North America and Europe in the third quarter of 2022 than it was in the third quarter of 2021. The energy crisis and prevailing market conditions have made it difficult for Bitcoin miners in both North America and Europe.
Hashrate Index’s Q3 mining report has highlighted many contributing factors to a lower hash rate and higher production costs for 1 BTC.
To measure market value per unit, the industry uses the hash price. It is calculated by multiplying dollar per terahash/second per hour by current mining difficulty. It is also affected by the BTC price.
Bitcoin’s hashrate rate was able to recover slightly in Q3 according to Hashrate Index.
This was due to heat waves that occurred in America during the American summer.
The Bitcoin price fell below \$20,000 once more, while the hash rate reached its all-time highs in September. The hash rate fell to record-breaking all-time lows due to this.
Rising energy prices in Europe and North America have further threatened miner profit margins. These factors, along with “mismanaged renewable energy policies, underinvestment in oil & natural gas, and Russia’s war on Ukraine” have all contributed to high energy prices.
Mining companies in the United States are facing a 25% increase in industrial electricity costs. They increased from $75.20/megawatt hour to $94.30/megawatt hour between July 2021 and July 2022. Hosting service providers have also seen an increase in power prices.
Mining operators who use mid-range equipment have difficulty reaching breakeven costs due to falling hash prices. Some miners have had to sell or abandon rigs that weren’t profitable.
These assets are becoming more difficult to liquidate as Bitcoin mining value is declining through 2022. According to the report, rig prices have fallen significantly in May and June but “flattened” in August and September. The outlook is grim.
“Old generation machines like the S9 saw an abrupt drawdown at June’s end due to Bitcoin’s rapid fall to $17.5k. Without access to the most cost-effective energy markets, the S9 and similar rigs will not be viable.
The public trading of mining companies has been under increasing pressure from rising interest rates. Equity fundraising can be used to raise capital but it can result in lower stock prices and diluting shareholders.
These at the market offerings can be used quickly to raise capital, which can be very useful for funding expansions or operating costs in this bear market.
Miners needed to sell their BTC holdings in order to keep their production running in 2022. Public miners sold less BTC than their monthly production in August and September for the first time since May.
Hashrate Index warned Q3 could bring more trouble in the mining industry with the potential for asset sales, bankruptcies and capitulation of miners at the end of the year.