Bitcoin Mining Difficulty Hits All-Time High as Hashprice Squeezes Miners Below $72 Per PH/Day

Bitcoin miners found themselves caught in a profitability squeeze during the week ending April 23, 2023, as the network’s mining difficulty reached an all-time high while the price of Bitcoin continued to retreat from its monthly peak. The combination of rising difficulty and falling prices pushed hashprice down to approximately $72 per petahash per day, putting pressure on operations with higher energy costs and triggering losses across publicly traded mining stocks.

TL;DR

• Bitcoin mining difficulty hit a new all-time high on April 20, the fifth consecutive increase
• Hashprice fell to approximately $72/PH/day, nearing the $70 threshold
• Bitcoin’s hashrate surged to an all-time high of 360 EH/s on April 19
• Bitcoin dropped roughly 10% from its local top of $30,800 on April 14 to approximately $27,500
• Public mining stocks posted broad losses, with Marathon Digital falling 18.82% for the week

Five Straight Difficulty Increases Squeeze Margins

The April 20 difficulty adjustment marked the fifth consecutive increase — the longest such streak since December 2021 through February 2022, when difficulty rose six times in a row. Each adjustment makes it harder and more computationally expensive to mine a block, and when combined with a declining Bitcoin price, the effect on miner revenue is amplified.

Bitcoin’s hashrate had surged to a record 360 EH/s on April 19, reflecting the massive influx of mining capacity that came online during Q1 2023 as improving margins attracted new participants. But the very next day, the difficulty adjustment kicked in just as Bitcoin’s price was slipping below $28,000, causing hashprice to plummet over 10% in a single stroke.

For a reference point, a Bitmain Antminer S19j Pro running at 100 TH/s now has a breakeven electricity cost of approximately $0.072 per kWh — a narrow margin that leaves miners with expensive power contracts underwater.

Bitcoin Price Retreat Adds to Pressure

Bitcoin’s slide from its April 14 local top of $30,800 to roughly $27,500 by April 23 represented a 10% decline that erased much of the optimism miners had built up during the first quarter. The global crypto market capitalization stood at $1.18 trillion, with Bitcoin’s market cap at approximately $534 billion.

The retreat came amid increasing sell pressure and a broader risk-off sentiment in financial markets. For miners, the timing could not have been worse. Rising difficulty and falling revenue is a classic margin compression scenario that historically forces less efficient operations to either curtail operations or shut down entirely.

Public Mining Stocks Take a Beating

The pain was reflected clearly in publicly traded mining stocks. The Hashrate Index Crypto Mining Stock Index fell 7.5% for the week, a sharp comedown from the prior week’s 30% rally. Nearly every major mining stock posted losses:

• Marathon Digital (MARA): $8.93, down 18.82%
• Riot Platforms (RIOT): $10.52, down 15.43%
• Hut 8 Mining (HUT): $1.69, down 15.08%
• HIVE Blockchain (HIVE): $3.23, down 14.78%
• Bitfarms (BITF): $1.04, down 7.56%
• IREN (formerly Iris Energy): $3.97, down 5.92%
• Argo Blockchain (ARBK): $1.44, down 3.36%

CleanSpark (CLSK) was the lone outlier, managing a modest gain of 1.04% to close at $3.87. Despite the rough week, 2023 remained a strong year for mining equities overall, with 20 of 23 tracked mining stocks still outperforming both Bitcoin and the Nasdaq year-to-date.

Industry Headwinds and Silver Linings

Adding to the sector’s challenges, Intel announced it was discontinuing its Bitcoin mining chip series during the same week, removing one potential source of next-generation mining hardware competition. Meanwhile, Bitcoin miner Mawson agreed to sell its Texas mining sites for $8.5 million to a Singapore-based fund manager, reflecting ongoing consolidation in the industry.

There is a potential reprieve on the horizon, however. The Hashrate Index noted that Bitcoin’s hashrate showed signs of plateauing at the end of the week, suggesting that the next difficulty adjustment could be negative — which would provide miners with some much-needed breathing room on revenue per terahash.

The Q1 2023 mining report from Hashrate Index, titled “From Ramen to Ribeye,” captured the dramatic improvement in miner conditions during the first three months of the year. That improvement, while partially reversed by April’s sell-off, has left the industry in a far better position than it was during the depths of the 2022 bear market.

Why This Matters

Mining difficulty adjustments are Bitcoin’s self-correcting mechanism, but they can create brutal short-term conditions for miners caught on the wrong side of the cycle. The current squeeze — rising difficulty meeting falling prices — is testing the resilience of the mining sector’s recovery.

The potential for a negative difficulty adjustment in the coming epoch would provide relief, but miners with power costs above $0.07/kWh are already feeling the pinch. This dynamic historically leads to consolidation, with better-capitalized and more efficient operators absorbing market share from struggling competitors. For investors watching the space, the divergence between individual mining stocks is likely to widen as the year progresses.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research before making any investment decisions.