The cost of mining 1 Bitcoin in the US rises from $5K to $17K in a year
It now costs Bitcoin (BTC) miners at least $17,000 to produce one BTC in the United States, compared to $5,000-10,000 a year ago, according to Bitcoin mining data resources Hashrate Index and Luxor.
The Bitcoin hash price has fallen 58% in a year
Unsurprisingly, high electricity prices across US states have contributed to rising Bitcoin mining costs.
In particular, between January 2022 and January 2023, the commercial electricity rate rose by an average of 10.71% per state in the United States, higher than the average increase in the Consumer Price Index of 6.4%.
Coupled with Bitcoin’s downward performance in 2022, which saw a maximum decline from around $48,000 to below $15,000, it is clear that active miners generated consistent losses due to the increase in operating costs and lower returns.
But this changed in Q1 2023 as the miners’ hash price, or the US dollar price per terahash per second per day (TH/s/d), rose 31% thanks to Bitcoin’s price recovery towards $30,000.
“As the new year looked to begin, the lowest day for hash price on a USD basis in Q1 was January 1st,” researchers at Hashrate Index noted, adding:
“It was only up from there as a 70% increase revived Bitcoin’s price during the quarter, and along with the hash price.”
Which state is cheapest, most expensive to mine Bitcoin in?
New Mexico emerged as the cheapest and in turn more profitable state for Bitcoin miners in Q1 at $16,850 to make one BTC. On the other hand, Hawaii was the most expensive at around $114,590.
Regionally, the southern and midwestern states of the United States are the most attractive to miners in terms of electricity prices.
Recently, some US states, including Arkansas, Montana, Missouri, Mississippi and others, have taken concrete steps to protect crypto miners from excessive taxes and regulations. On the other hand, Texas has changed its utilities and tax codes, strengthening restrictions on crypto mining companies.
Energy deflation can increase the profitability of the miners
Furthermore, the researchers expect Bitcoin mining margins to grow further based on the US Energy Information Association’s (EIA) expectations of energy price deflation.
Related: Bitcoin Advocates Gather at Texas State Capitol to Oppose Bill That Reduces Mining Incentives
For example, the agency expects electricity demand to fall 1% in Q2, citing additional generation from renewable sources and cheaper natural gas prices. It further expects natural gas prices to remain below $3 in 2023 vs. 2022’s $6.45 average.
Bitcoin mining stocks shine
Lower operating costs could help otherwise cash-strapped Bitcoin miners survive in 2023. For example, the share price of Core Scientific, an already bankrupt Bitcoin miner, has jumped over 450% so far this year.
Similarly, the HI Crypto Mining stock index has risen more than 100% this year, showing a return on investor appetite for mining stocks.
Hashrate Index researchers also stated:
“If the bitcoin price were to rise another 40% to reach $42,000 this year, most mining stocks would rise more than 50% from today’s levels, while the top four-to-five winners would rise more than 150% .”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
