Energy costs are a growing concern for cash-strapped Bitcoin miners
Bitcoin miners have had one of the worst times since the BTC price crash. They have had to see their earnings drop to yearly lows after having an incredible year in 2021. In light of this, bitcoin miners have to look at ways to cut costs as much as possible. The most obvious way they can reduce costs is by cutting electricity costs, which are one of the biggest expenses for a miner.
Get cheaper electricity
Now the mining of bitcoin is directly linked to electricity. As a proof of work network, miners must factor in their power costs to directly determine their revenue and, by extension, their profit margins. As the price of BTC has fallen, so has the income for miners, and finding cheaper electricity is one of the best ways to increase profit margins.
Back in 2021, miners saw revenues of $500 per MWh of energy used in an energy-efficient Antminer S19. However, this number has dropped to less than half of the 2021 numbers, as the price of bitcoin is trending in the low $21,000s.
In order to keep up with a good profit margin, it is in the miners’ interest to find cheaper electricity. So say a miner paid $40 per MWh for a mining machine back in 2021 and saw revenue of $500, that means their profit margin was $460, so $11150. To maintain such margins, the miner would have to cut electricity costs by about half to around $20.
Miners look to cheaper energy sources | Source: Arcane Research
This search for cheaper energy alternatives had seen miners move into countries such as Russia for their operations. However, the war has destabilized this and miners are looking towards places with cheaper energy costs to start operations.
Make Bitcoin Mining Cheaper
Mostly, the public bitcoin miners have taken massive hits due to the decline in bitcoin prices. A good number of them have had to sell their BTC holdings just to have the cash flow to keep their operations going, and in the last three months some of them have sold more BTC than they produced.
BTC recovers above $21,600 | Source: BTCUSD on TradingView.com
In an effort to reduce operating costs, bitcoin miners are now looking towards more energy efficient machines. That is if they were unable to find cheaper energy alternatives. One of the machines that has grown in popularity among miners is the Antminer S19 series. But even this does not provide the cost savings that miners will require to continue.
Ultimately, it is still in the interests of the miners to find cheaper electricity. But with China banning crypto mining and destabilization in Russia, US states like Texas have started offering attractive energy prices in an effort to draw more bitcoin miners to the region.
Featured image from Investopedia, charts from Arcane Research and TradingView.com
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