A report on the state of the Bitcoin mining business in 2022 was published by the mining data site Hashrate Index.
The analysis looks at the sharp drop in mining profitability in 2022 over 2021 despite falling Bitcoin prices and an increase in hash rate.
The Most Hard-Crushing Bear Market
According to research released on Wednesday, in November of last year, Bitcoin’s cash price fell to an all-time low of $55.94/PH/day. Cash price is a monetary indicator of miner earnings for each used unit of hashing power.
The average hash rate for the year 2022 was $123.88/PH/day, a significant decrease from the average of $314.61/PH/day for 2021. The beginning of Bitcoin’s bear market and an average 16% rise in energy prices across the United States in 2022 were the main causes of the sharp decrease.
“35 states have lower average industrial electricity rates than the S19 Pro’s current break-even electricity price of $92 per MWh,” explained the report.
The price of hosting services increased as a result of rising energy expenses. However, a “reasonable contract” Prior to 2022, might have provided rates around $0.05-$0.06/kWh, but it’s currently “not uncommon” to observe prices of $0.08–0.09/kWh.“Anything below $0.075/kWh is considered “a steal” given market conditions,” The report carried on.
The price of ASICs, the specialized equipment required to mine Bitcoin effectively, has fallen in the interim. All rigs from the new, mid, and old generations saw their returns drop by more than 80%, which led to an increase in the S19 XP premium throughout the year.
Public Miners Are Harmed
In this context, public Bitcoin miners have incurred significant losses, with the majority of pure-play Bitcoin mining equities falling by over 90% in 2022. Reports about the company’s solvency caused Core Scientific (CORZ), one of the biggest miners in the world, to fall by 99%, leading to an official bankruptcy filing before the year’s conclusion.
Greenidge Generation (GREE), which struggled to pay off high-interest debt backed by its own ASIC equipment, had the second-worst mining stock performance, falling 98%.
Similar loans have hurt other miners as well, and Iris Energy was compelled to reduce its mining capacity in order to repay its debt to NYDIG in November.
During the 2021 bull market, public miners were encouraged to grow as soon as possible, which led to them increasing their advantage over private miners’ hash rate from 14% to 19%.
Overall Bitcoin hash rate increased by 41% in 2022. Public miners, who boosted their cumulative hash rate by 59% as opposed to their private counterparts, who saw an increase of only 19%, were significantly responsible for this as well.
The year 2022 saw the introduction of Bitcoin mining as “the sole proof of work game in town.” Its sole significant opponent, Ethereum, switched to a proof of stake consensus mechanism in the middle of September, thereby destroying Ethereum’s mining sector with a single upgrade.
Despite having three and a half months without proof of work, Ethereum’s network miners nevertheless made almost as much money ($8.87 billion vs. $9.55 billion) as Bitcoin miners did in 2017. Staking validators have taken the position of Ethereum miners as of late, and they generate new ETH at a far slower rate than miners did before the merging.
“Staking validator revenue is a shadow of mining revenue,” stated the report.
