In recent days, the Bitcoin network has experienced a significant and rapid decline in its mining hash rate. Currently, the hash rate is hovering around 440 EH/s, having dropped to as low as approximately 414 EH/s. Over the past few days, the total computational power dedicated to mining Bitcoin has decreased by about one-third compared to recent peaks.
For industry participants, this drop in hash rate raises important questions about its potential impact on the cryptocurrency market, particularly regarding Bitcoin's production cost.
Extreme Winter Storm Strains Power Grid, Hurts Miners
On January 15, the Electric Reliability Council of Texas (ERCOT) issued a public warning. Due to persistently cold temperatures, record-breaking electricity demand, and unusually low wind power generation,电力供应水平预计将较低. ERCOT requested that businesses and residents across Texas conserve electricity where possible. The council also indicated that localized rolling blackouts might occur.
The extreme weather event placed the power grid under significant strain. With freezing conditions, the combination of constrained supply and surging demand drove electricity prices sharply higher.
Data from LSEG showed that prices at the PJM West Hub, a key electricity pricing point, surged from their typical level of around $35 per megawatt-hour (MWh) to a peak of approximately $158 during the cold snap. This represented the highest electricity price level seen since December 2022.
Soaring power prices drastically increased the operational costs of Bitcoin mining. The United States is currently the world's most concentrated and dense region for Bitcoin hash rate. Consequently, the volatility in electricity prices triggered by this winter storm had a substantial impact on miners' operations.
Taking the largest US mining pool, Foundry USA, as an example, its hash rate dropped from a usual level of around 150 EH/s to a low of 77 EH/s. Luxor, another major US-based mining firm, was similarly affected.
The impact of this freeze was most severe in Texas, a major global hub for Bitcoin mining. Prominent cryptocurrency miner Marathon Digital also reported a noticeable drop in its operational hash rate.
Executives at Marathon Digital stated to media that many miners have now shut down portions of their mining rigs to slash operational costs. "Including Marathon, a significant number of Texas miners have reduced their operations over the past few days. We are cutting power consumption to support the Texas grid and residential power needs during the current winter blast. During a crisis, the energy load from Texas miners can be released within mere minutes, freeing up supply for others. This is what we have witnessed over the last several days."
This situation is not without precedent. The PJM West Hub price reached its highest level since December 2022, when prices had previously climbed as high as $179 per MWh. For context, the average price throughout 2023 was $37, and the average from 2018 to 2022 was $42.
A report from TheMinerMag indicated that the large-scale retreat of miners freed up approximately 4 gigawatts (GW) of electricity.
A Repeat of the 2022 Winter Storm? How Are Miners Faring?
In December 2022, a massive winter storm named "Elliott" pushed natural gas usage to record levels and caused failures in some power and natural gas systems across the eastern half of the United States. The subsequent shutdown of dozens of power plants, coupled with historically high electricity prices, once endangered the entire US Bitcoin mining industry.
At that time, Texas electricity prices skyrocketed by over 400%. By the end of December, the Bitcoin network hash rate had fallen to 156 EH/s, marking the lowest point for the entire year.
The return of severe winter weather this year inevitably brings back memories of that intensely cold period.
If we broaden our perspective to a larger time cycle, it's clear that miner revenues have indeed been gradually declining as the initial euphoria from the spot ETF approvals fades.
Over the past month, the hash price—a metric representing the US dollar value earned per unit of hash rate—has fallen by approximately 30%.
The frenzy around BRC-20 inscriptions had previously brought miners extremely high transaction fee revenue. However, as the intense activity surrounding inscriptions has subsided for now, the fee income for miners has continuously decreased.
Data from BTC.com shows that the total network transaction fees on January 17 were approximately 104.6 BTC, a decrease of about 52% compared to three days prior (219 BTC).
Accompanying the drop in hash rate, Bitcoin's mining difficulty is also poised for a rare downward adjustment. BTC.com data indicates the current network difficulty is 73.2 T. The next adjustment is expected in about two days, with a predicted decrease to a difficulty of 70.92 T.
Although the impact of this particular blizzard is likely to be short-term, the pressures facing mining companies and individual miners are set to increase further as the Bitcoin halving cycle approaches. With less than one hundred days remaining until the halving, the projected average production cost per Bitcoin post-halving is estimated to be $37,856. Most mining companies will face challenges related to sales and administrative expenses, with their estimated average breakeven point believed to be around $40,000.
Judging by the current coin price and market expectations, mining firms are not under immediate profitability pressure, but a decline in profit margins seems almost inevitable. For those looking to understand the full scope of mining economics and prepare for market shifts, it's crucial to 👉 access real-time mining data and analytics.
Frequently Asked Questions
What is Bitcoin hash rate?
Bitcoin hash rate refers to the total combined computational power used by miners to process transactions and secure the Bitcoin network. It is a key indicator of network health and security, measured in hashes per second (e.g., EH/s is exahashes per second).
Why does extreme weather affect Bitcoin mining?
Bitcoin mining is an extremely energy-intensive process. Extreme weather events can cause electricity demand to spike and supply to falter, leading to soaring power prices. Miners, who are sensitive to operational costs, often shut down equipment to avoid losses or to support grid stability during these crises.
What is the Bitcoin halving?
The Bitcoin halving is a pre-programmed event that occurs approximately every four years, where the reward for mining new blocks is cut in half. This reduces the rate at which new bitcoins are created, effectively lowering the supply of new coins and historically having a significant impact on Bitcoin's price and mining economics.
How can miners prepare for volatility in electricity costs?
Miners can employ several strategies, including geographical diversification to access stable and cheap power sources, utilizing flexible load agreements that allow them to power down during grid stress, and hedging energy costs through financial instruments. To explore a comprehensive suite of 👉 advanced risk management tools for miners, dedicated platforms offer valuable resources.
Will the hash rate drop affect Bitcoin's price?
A short-term hash rate drop does not directly cause a price change. However, it can influence market sentiment and indicates stress within the mining sector. A sustained drop could potentially impact network security, but the recent event is largely viewed as a temporary weather-related issue.
What happens to mining difficulty when hash rate drops?
The Bitcoin network automatically adjusts its mining difficulty approximately every two weeks to ensure a consistent block time. If the hash rate drops significantly over an adjustment period, the difficulty will decrease, making it easier for the remaining miners to find blocks and helping to stabilize the network.