Revenue for Bitcoin mining fell by 21.6% in May, due to a failure to adjust the difficulty in the face of high hashrate.
Bitcoin mining profitability is declining
The number of BTC mined has remained more or less constant, but their value has declined significantly.
According to a recent analysis by The Block Research last month, miners in total cashed in around $906.2 million, whereas in April it had been $1.160 billion. Compared to October 2021, when the revenue was 1.720 billion, the decrease is around 47%.
It is worth noting that this drop had almost no impact on the proper functioning of the network, since periodic adjustments to the difficulty reduce costs as revenue decreases, but paradoxically it also did not affect the overall computing power invested.
In fact, in April it averaged over 200 Ehash/s, while in May it still rose above 210 Ehash/s. In October 2021, it was just over 150 Ehash/s.
However, it is important to always remember that while the value of the BTC collected fluctuates very much and very quickly, the hashrate fluctuates less, and above all very slowly, since new machines have to be bought and installed to increase it.
The result of this dynamic has been a collapse in mining profitability, which could probably lead to a reduction in hashrate in the coming weeks, with miners switching off less efficient machines in order to avoid making a loss.
In October 2021, the average profitability was around $0.3 per Th/s per day, while by April 2022 it had already dropped to $0.2. In May it fell further to just above $0.1 per day. It has not been since December 2020 that such a low level in the profitability of Bitcoin mining has been seen, although it is not yet at the lows of recent years, which were reached in October 2020.
BTC price, hashrate, difficulty and profitability for miners
The vast majority of revenue for miners still comes from the Bitcoin created and given as prizes to those who manage to mine a block first ($890 million in May), while only a small part comes from transaction fees ($16 million). However, in May, the share of miners’ takings from commissions rose to 1.87%.
In reality, since the days following Terra’s implosion, Bitcoin’s hashrate has ended the growth phase that has been going on since July last year. Over the past few days, however, a downward phase seems to have begun.
With such a low profitability it is inevitable, so much so that a reduction in the difficulty scheduled for next Wednesday may also be unavoidable. For the time being, the hypothesis is that of a 4% reduction.
A first reduction from the absolute all-time highs of mid-May had already taken place on 25 May. As long as the price of BTC does not return well above the $32,000 mark, it is very difficult to imagine that mining profitability and difficulty will rise again.