It now costs at least $17,000 for bitcoin (BTC) miners to produce one BTC in the US.up from $5,000-10,000 a year ago, according to bitcoin mining data resources Hashrate Index and Luxor.
The bitcoin hashprice has fallen by 58% in a year
As expected, Rising electricity rates in every US state have contributed to rising bitcoin mining costs.
In particular, Between January 2022 and January 2023, the commercial electric rate rose an average of 10.71% per US state.above the average rise in the consumer price index of 6.4%.
Along with bitcoin’s downward performance in 2022which recorded a maximum decline from around $48,000 to less than $15,000, it is evident that active miners generated consistent losses due to increased operating costs and lower returns.
But this changed in the first quarter of this year when the miners’ hashprice, or the price in USD per tera-hash per second per day (TH/s/d), rose 31% thanks to the recovery of the bitcoin price towards $30,000.
“Despite how bleak the new year seemed, the lowest day for the hashprice in USD in the first quarter was January 1Hashrate Index researchers note, adding that:
“From there, the 70% rise revived the bitcoin price during the quarter, and with it, the hashprice.”
Which state is the cheapest and which is the most expensive to mine Bitcoin?
New Mexico turned out to be the cheapest and, in turn, most profitable state for bitcoin miners in the first quarter, with 16,850 dollars to mint a BTC. On the other hand, Hawaii was the most expensive, at USD 114,590.
By regions, the southern and midwestern US states are the most attractive to miners in terms of electricity.
More recently, some US states, such as Arkansas, Montana, Missouri, and Mississippi, among others, have taken concrete steps to protect cryptocurrency miners from excessive taxes and regulations.. Besides, Texas has amended its utility and tax codes, tightening restrictions for cryptocurrency mining companies.
Energy deflation could increase the profitability of miners
On the other hand, some researchers expect bitcoin mining margins to grow further based on expectations of energy price deflation from the United States Energy Information Association (EIA).
For example, the agency expects electricity demand to fall 1% in the second quarterciting additional generation from renewable sources and cheaper natural gas prices. In addition, it expects natural gas prices to remain below $3 in 2023. instead of the $6.45 average of 2022.
Bitcoin mining stocks look attractive
Lowering operating costs could help cash-strapped bitcoin mining companies survive in 2023. For example, the share price of Core Scientific, an already bankrupt bitcoin mining company, has jumped more than 450% YTD (year-to-date).
Similarly, the HI Crypto Mining Stock Index has skyrocketed over 100% this year, showing a return of investor appetite for mining company shares.
The Hashrate Index researchers noted that:
“If the bitcoin price were to rise an additional 40% to reach $42,000 this year, most mining stocks would rise more than 50% from the current level, while the four to five biggest gainers would soar more than 150 %”.
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