Bitcoin’s rising value is marred by mining costs that often exceed profitability. Recent data indicates that large operations now spend over $82,000 to mine a Bitcoin, with smaller miners suffering even steeper losses. Factors such as rising electricity costs, tariff impacts, and reduced rewards due to halving are driving mining costs higher. This situation exacerbates wealth inequality within the Bitcoin ecosystem, as the richest wallet addresses hold the majority of BTC.
Bitcoin has seen a notable price recovery, inching closer to its historical high following a dip that was closely aligned with the stock market’s downward trend. Ironically, as the cryptocurrency gains value, the profitability of mining it is increasingly questionable, even for larger operations. Data from CoinShares points to the rising costs associated with electricity and computing power often surpassing the actual worth of Bitcoin.
Currently, large mining corporations are facing costs upwards of $82,000 to mine just a single Bitcoin, which is oscillating around a value of $95,000 at the moment. While this may still be profitable, the margins are razor-thin compared to a mere three months ago when mining costs were approximately $56,000. This represents a hefty 47% rise in costs over just one quarter, leaving many in the industry on shaky ground.
However, the landscape changes significantly for smaller miners. Those operating on a more modest scale in the United States are now looking at expenses around $137,000 for one Bitcoin. The situation is even bleaker for miners based in Germany, where costs can balloon to about $200,000 per coin. Neither of these figures aligns closely with Bitcoin’s peak price, meaning miners must hold on, banking on the currency’s future valuation to offset their initial losses.
The steeper costs stem from several intertwined factors. Firstly, there’s the surge in electricity prices influenced by inflation, trade tensions, and soaring demand for technologies that consume large amounts of power, such as artificial intelligence. Additionally, tariffs have further inflated the expenses associated with mining equipment. A critical event in the Bitcoin cycle, known as ‘halving,’ also happened around a year ago, reducing the mining rewards and thereby tightening the monetary supply and making mining inherently more expensive.
For the average observer, it may not be a significant blow if Bitcoin mining fades into unprofitability. However, it does highlight a growing divide within the crypto ecosystem. The promise of Bitcoin as a decentralised currency, meant to democratise wealth away from traditional fiat systems, seems to have faltered. Research from BitInfoCharts reveals that a staggering 90% of all BTC is concentrated within the top 1% of wallet addresses. Far from being an equalising force, the current mining climate appears to enrich the already wealthy further, accentuating the disparity.
