Bitcoin mining businesses in North America and Europe have not had a very good third quarter of 2022 due to rising energy costs.
Energy concerns in North America and Europe and market conditions have led to another grim quarter for Bitcoin miners. Hashrate Index’s Q3 mining report cites various explanations behind the decreased hash price and increased cost to create 1 BTC.
Hash price measures the market value per unit of hashing power. Changes in mining difficulty and BTC price affect the dollar per terahash per second every day. Hashrate Index says that heat waves over the American summer led to a reduction in hashrate, which coincided with a BTC price rebound.
The price of Bitcoin dipped below $20,000 again in September, and hash rates reached new highs, causing the hash price to fall.
Rising energy costs in North America and Europe jeopardized miner profits. Mismanaged renewable energy policies, underinvestment in oil and gas, nuclear plant decommissioning, and Russia’s war with Ukraine have led to energy prices skyrocketing. Average industrial power costs rose 25% from July 2021 to July 2022, from $75.20 to $94.30 per megawatt hour. This has led hosting providers to raise power pricing in hosting contracts.
As hash price drops, some miners with mid-range equipment face breakeven expenses. Retail miners previously abandoned or sold unprofitable rigs.
As Bitcoin mining values decrease in 2022, liquidating these assets becomes harder. According to the research, rig costs fell dramatically in May and June but ‘flattened’ in August and September.
“Old-gen machines like the S9 experienced a precipitous drawdown at the end of June amid Bitcoin’s freefall to $17.5k. With mining economics in the dumpster, the S9 and similar rigs have become unviable except in the cheapest energy markets.”
Publicly traded mining corporations face rising interest rates and trouble obtaining credit lines. Some corporations have turned to equity fundraising, which dilutes owners at lower prices. These at-the-market offerings can assist fund expansion and running costs during a bad market.
Miners sold BTC to keep production running in 2022. In August and September, public miners sold fewer BTC than their monthly production for the first time since May.
Hashrate Index warned that Q3 could be a forerunner to future difficult times for the mining industry, including distressed asset sales, bankruptcies, and miner capitulation.
