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Since Ethereum abandoned Proof-of-Work and switched to Proof-of-Stake, crypto mining is completely dominated by Bitcoin.
Besides Bitcoin, now only Dogecoin, Litecoin, Ethereum Classic, Monero, Bitcoin Cash, Bitcoin SV, Zcash, and other minor cryptocurrencies can be mined. It is enough to mention that Bitcoin’s market capitalization is sixteen times the sum of that of the altcoins just mentioned.
In other words, Bitcoin’s dominance is over 90% within the cryptocurrencies that are still minable.
Therefore, when talking about crypto mining, we are now talking primarily about Bitcoin mining, with the other Proof-of-Work based cryptocurrencies only acting as sidekicks in this respect.
Bitcoin’s new all-time high
Yesterday, Bitcoin‘s hashrate set a new all-time high.
Since the hashrate is not an accurate figure that is taken directly from mining activities, but is an estimate that is calculated from block-time and difficulty, in order to make comparisons regarding its evolution over time it is convenient to take the weekly average as a reference.
The day before yesterday, for the first time in its history, Bitcoin’s weekly average hashrate exceeded 320 EH/s, and yesterday it hit a new all-time high at 323 EH/s.
It is worth noting that after a peak at over 12 and a half minutes recorded by Bitcoin’s block-time in late January, it returned below 10 minutes in February, thanks precisely to the new surge in hashrate.
At the end of January, the weekly average was just under 300 EH/s, but since mid-February it has exceeded 300. On 16 February, the block-time even dropped to 8 minutes.
Taking daily data, the single highest peak actually occurred precisely on 16 February, with 342 EH/s, whereas the largest hourly peak also occurred on the 16th at 383 EH/s.
Taking the weekly averages as reference again, it is worth mentioning that at the beginning of 2023 the hashrate was below 270 EH/s, so in these first weeks of 2023 it has increased by almost 20%, while a year ago it was at around 200 EH/s.
The health of crypto mining
In December 2022, it seemed that the health of crypto mining was bad, because in the face of still high expenses, the revenues were too low. Indeed, for example, Core Scientific was forced to file for bankruptcy.
But since the price of BTC has returned well above $20,000 it seems that many of the problems have been resolved.
Indeed, it should be remembered that miners cash in BTC, and they often cash in the same amount over time, which furthermore every four years practically halves.
Since they have to incur very high expenses, especially due to the large amount of electricity consumed, they are forced to sell the BTC cashed in, and therefore if these have a lower market value, then effectively the earnings for the miners decrease.
Conversely, as the market value of Bitcoin increases, the miners’ realized gains also increase, so they can switch on less powerful machines again, or even buy new, more powerful ones.
The data therefore seem to suggest that the disaster announced in December did not happen in the end, even if someone still paid the price. The current state of the crypto mining industry looks good, thanks in part to the fact that the US state of Texas certainly seems to want to encourage it.
Crypto mining in the US
The single state in the world on whose territory the largest hashrate is allocated has been the US for a couple of years now.
But not all US states have the same approach to mining. In fact where electricity is cheap, like in Texas, it is seen more as a revenue opportunity, while in other states it is seen as a problem because of high energy consumption.
However, according to the data coming out of this market, it appears that the former are outweighing the latter.
The coupon market on Mining Rigs
The fact that this market is on the upswing is also evidenced by the fact that BitFuFu has finally started the Crypto Mining Rig coupon market.
BitFuFu is a cloud mining company that is a partner of Bitmain, i.e., the manufacturer of the famous Antminer, and it has finally started a market for coupons on Antiminer-branded rigs produced precisely by Bitmain.
The fact is that these coupons were actually issued last year, but until now had not been used because the miners did not have enough funds to purchase new equipment.
And instead, BitFuFu yesterday finally opened the exchange platform for these coupons, because now the market is ready to use them.
It means that with the significant increase in the price of BTC in January, miners finally have the funds to buy new, more powerful and efficient machines that can produce more hashrate for the same amount of consumption.
It is therefore not surprising that as of this very month of February, global Bitcoin hashrate has returned to growth making new all-time highs.
The costs of crypto mining
While high electricity consumption is the biggest cost item for crypto mining, it is not the only one.
Along with the possible purchase of more powerful machines, another major cost item is cooling, since these machines produce a lot of heat that needs to be disposed of. For this reason, many mining farms are placed in cold locations where it is easier to cool them.
Moreover, the inevitable maintenance and repair costs of mining farm machines and infrastructure should not be forgotten, thus bringing costs to levels that are not easy to bear if revenues go down.
In light of this, it is not difficult to understand why 2022 was a black year for crypto mining, nor why in 2023 the industry is recovering.
Moreover, competition in this sector has increased greatly in recent years, mainly due to large industry interventions that can wipe out smaller miners.
However, it is worth remembering that the largest miners are pools, that is, organizations that operate globally allowing many miners to pool their computing power to maximize the chances of succeeding in mining BTC.
Indeed, it is worth noting that mining is a competition in which every 10 minutes there is only one fixed prize up for grabs, which is awarded in a block to the single miner, or the single pool, that succeeds in confirming a block.
In light of this, it is also possible to understand why Bitcoin mining is now primarily a thing for large companies and large mining farms, while small miners are mostly left with the opportunity to mine other cryptocurrencies such as Dogecoin, Litecoin or ETC (Ethereum Classic).