The upcoming record difficulty drop means mining Bitcoin is about to get a lot more profitable, while the hash rate slowly returns to the network, Glassnode predicts.
Bitcoin (BTC) miners are “unlikely” to pressure BTC price by selling coins in the coming weeks, new data says.
As part of its latest weekly report, “The Week On-chain,” analytics resource Glassnode sought to allay fears of another large miner sell-off.
Difficulty drop a gift to remaining miners
Amid the ongoing transfer of mining equipment — and, therefore, Bitcoin’s hash rate — out of China, fears have emerged over miners selling BTC to cover costs and liquidations.
Given the magnitude of the geographical changes — the China rout marks the largest hash rate shake-up in history — miners could compound selling pressure by disposing of coins that may not otherwise have moved in a long time.
The combined impact of selling and the reduced hash rate offers a “double whammy” for Bitcoin’s price action, reducing the potential for gains or even maintaining significant support levels.
For Glassnode, however, the situation appears to be already under control. Miners are in transit, it notes, and those still online face a giant windfall.
This is because later this week, Bitcoin’s difficulty will drop by almost 25% — again, the biggest move down ever — meaning it will be more profitable to mine Bitcoin for the remaining miners.
As such, there should be less incentive to sell, as network participants will be in an upward spiral of profitability until the missing hash rate returns and difficulty increases.
“The Bitcoin mining puzzle is 23.6% harder despite revenues being up 154% on a 7-day average basis,” the report explains.
“Since a very large proportion of hash-power is currently offline and in transit, and the next difficulty adjustment is estimated to be -25%. As such, miners who remain operational are likely to become even more profitable over the coming weeks, unless price corrects further or migrating hash-power comes back online.”
Glassnode added that miners are more likely to be liquidating coins amassed over time as part of the move.
“This largely indicates that miners who are in operation are unlikely to exert excessive compulsory selling... and thus it is more probable that Chinese miners liquidating treasuries is the dominant sell-side source,” it concluded.
Costing opportunities
A separate source, meanwhile, highlighted just how profitable mining could be under current circumstances.
Related: World’s first Bitcoin ETF adds $3M per day throughout BTC price dip
Using data that puts Bitcoin’s energy usage at around 2,520 gigawatt-hours per two-week difficulty period, writer Hass McCook underscored the 75% profit opportunity open to miners with specific operating and capital expenditure.
If it costs at the most $20,000 to mine 1 BTC, the difference between that expenditure and spot price, which was $34,500 at the time of writing, is plain.
“So if the cost to mine a coin is about $20k in the absolute worst of cases (probably closer to $13-14k for the professional shops now), how hard would you work right now to capture the 75%+ profit available to you...?” McCook concluded.
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