Bitcoin Mining Difficulty Hits Record High Amid Rising Competition
Bitcoin mining difficulty reached a new record high, as competition among companies minting the cryptocurrency intensifies. According to data from crypto-mining tracker CoinWarz, the difficulty level increased by 3.5% on Wednesday, continuing a steady climb that typically reflects price expectations. Since April’s halving, which cut miners’ potential revenue by half, Bitcoin has dropped around 10%, squeezing the margins of many mining companies.
“The effect of the all-time high in difficulty, right on the back of the halving earlier this year, is making the outlook extremely challenging for many miners — especially those at the higher end of the cost curve,” Christopher Bendiksen, Bitcoin research lead a CoinShares, told Bloomberg. He added that if current trends persist, some miners may struggle to stay cash flow positive or profitable.
Miners secure the Bitcoin network by validating transactions on the blockchain using specialized computers, earning rewards in Bitcoin. Despite a 38% rise in Bitcoin’s price this year, hitting a peak of $73,798 in March, shares of major U.S. mining companies like Marathon Digital Inc. and Riot Platforms Inc. have plummeted by 31% and 54%, respectively.
Bitcoin’s hash rate, which measures the total computing power supporting the network, also reached an all-time high in September. Historically, Bitcoin’s price often dips following the halving, but begins to rise months later, reaching new record highs. Many in the industry anticipate a fourth-quarter rally, according to Bobby Zagotta, CEO of Bitstamp USA.
However, Bendiksen warns that some miners are betting on a significant price increase for Bitcoin, and failure to see that could spell trouble for certain operators.
Bitcoin Miners Continue Investing in New Hardware Despite Challenges
Despite these challenges, Bitcoin miners continue to invest in new, specialized hardware, demonstrating strong confidence in the future of the network. Energy costs have risen, but so has the energy efficiency of modern ASIC machines. Illia Otychenko, lead analyst at CEX.IO, told Decrypt that the energy efficiency of Bitcoin mining hardware has “more than doubled” between 2018 and 2023, allowing miners to mitigate rising electricity costs. This efficiency is key to staying competitive as older machines rapidly become obsolete.
In addition to adopting more advanced equipment, some miners are reactivating older rigs that have become profitable again due to Bitcoin’s price gains. Jeffrey Hu, head of investment research at HashKey Capital, told Decrypt that this trend, combined with investments in newer hardware, is driving the hash rate higher. Moreover, many miners are holding onto their mined Bitcoin rather than selling it immediately, banking on future price increases—a strategy reflecting their confidence in Bitcoin’s long-term value.
Industry experts also see miners diversifying into alternative revenue streams to sustain operations. Some companies, like Marathon Digital, have adopted a “full HODL” strategy, while others are exploring opportunities in AI computing, which demands vast computing power and can leverage miners’ existing energy and cooling infrastructure. Firms like Core Scientific and Bitdeer are already providing compute power for AI, positioning themselves for growth in both the AI and crypto sectors.
As the industry consolidates, capital-rich miners are acquiring struggling competitors to expand their market share, exemplified by CleanSpark’s acquisition of GRIID for $155 million in June and Riot Platforms‘ stake in Bitfarms. While the outlook remains challenging, especially with block rewards diminishing over time, experts believe that diversification and technological advancements will help miners remain competitive in the evolving landscape.
