Bitcoin Miners’ Profitability Plummets Amid Rising Difficulty and Tariffs

Bitcoin miners are facing a 28% drop in profitability as hashprice falls to $44, raising concerns over network security and price stability. This crisis heavily affects small miners while larger operations adapt. Factors such as rising network difficulty and Trump’s trade war are contributing to increased operational costs, leading to fears of centralisation and existential threats to Bitcoin as a cryptocurrency.

Bitcoin miners are experiencing a significant decline in profitability, with a key metric known as hashprice dropping to $44. This represents a 28% fall from January levels, hovering just above the critical $40 mark considered as the break-even point. Prolonged low hashprice could jeopardise network security, compel miners to sell off Bitcoin to meet costs, and promote centralisation, all of which threaten Bitcoin’s price stability and long-term trust in its decentralised framework.

The profitability crisis predominantly impacts small miners, as rising difficulty levels further compress hashprice. Eli Nagar, CEO of Braiins, noted that while those with robust operations can manage the “breather” at $44, many will not feel secure until hashprice reaches $60. This contrast sharply with the past crypto rally surrounding Donald Trump’s inauguration, which previously allowed Bitcoin to reach new heights.

Current dynamics are unfavourable due to Trump’s trade war affecting the broader market, leading to diminished transaction volumes for Bitcoin. Concerns have been raised that the ongoing trends represent an “existential threat” to the leading cryptocurrency’s viability. Additionally, Bitcoin’s network difficulty is at an all-time high, requiring miners to exert greater effort to obtain the same block rewards, which are currently at 3.25 Bitcoin, equivalent to $274,000.

Miners utilising older or less efficient equipment are particularly vulnerable due to squeezed profit margins exacerbated by increasing electricity costs. There is a dichotomy between Bitcoin advocates, who celebrate rising difficulty levels as a sign of robust commitment to Bitcoin, and actual miners, who are facing harsh economic realities and operational challenges.

American miners are bearing the brunt of the situation, confronting heightened network difficulty alongside tariffs exceeding 131% on new machinery imports due to Trump’s policies. As a result, the mining industry is vulnerable to centralisation, with five companies reportedly controlling 21% of Bitcoin production.

The woeful network activity was highlighted recently when a block was mined containing only one transaction, prompting Hansen to declare this a potential “existential threat.” A debate arose over Bitcoin’s future as a store-of-value asset, drawing opinions from various industry figures. Despite the challenging landscape, Nagar maintains that increased difficulty could signal competitive resilience among miners and a potential bullish outlook for the long-term future of Bitcoin.