Bitcoin Mining Profitability Worsens as Price Stays Below Production Cost for Five Months

Bitcoin mining profitability is deteriorating rapidly as the price of Bitcoin remains below production costs for an extended period, The Block reported on June 24.

Bitcoin miners' daily revenue has fallen to about $30 million on a seven-day moving average basis, down sharply from more than $50 million last summer, according to the report. Transaction-fee revenue has also dropped to less than $250,000 a day, reducing its share of total revenue to a negligible level.

Bitcoin was trading at about $62,500, while JPMorgan estimates the average cost of production at about $78,000. The cryptocurrency has remained below production cost for five straight months, the longest such stretch in the current cycle.

About 20% of miners are now operating below break-even at current prices, The Block said. That has prompted a growing number of high-cost miners to switch equipment on or off depending on price. Over the past six months, the beta between mining difficulty and Bitcoin's price has also risen to 0.62.

Bitcoin mining difficulty fell about 10% in the second week of June. It was the second double-digit decline this year, and both occurred during periods when Bitcoin traded below production cost for a prolonged stretch.

Publicly traded miners are selling Bitcoin holdings to raise operating cash instead of suspending production. They sold about 32,000 Bitcoin in the first quarter alone to cover operating costs.

With about two years remaining until the next halving, block rewards will continue to decline, The Block said. If transaction-fee revenue does not recover, any improvement in miners' profitability will ultimately depend on whether Bitcoin prices rise.