Bitcoin Trades 30% Below Energy Value as Miners Face Profitability Squeeze

On August 8, 2025, Charles Edwards, founder of Capriole Investments, highlighted that Bitcoin’s Energy Value had surged to a range of $145,000 to $168,000, while the market price lingered near $116,000. This placed Bitcoin at a 30% discount to its energy-based fair value — a deeper gap than in September 2020, when BTC traded near $10,000 before its historic bull run.

Three weeks later, the core premise still holds. Bitcoin continues to trade flat around $110,000–$111,000, keeping the valuation gap intact.

Capriole chart — Image from Charles Edward's linked in post

Record Hashrate and Network Strength

Bitcoin’s network strength has only increased since Edwards’ post. On September 2, 2025, the 7-day average hashrate crossed 1 zettahash per second (ZH/s) for the first time ever. Daily peaks have reached as high as 1.279 ZH/s, underscoring record levels of mining power securing the network.

This expansion in hashrate is what underpins the Energy Value model’s high fair value estimates. More energy input into mining equates, under the model, to a higher intrinsic value for Bitcoin.

Miner Revenue: Subsidy and Fees

Bitcoin miners currently earn approximately 500 BTC per day. This is split between:

450 BTC/day from the block subsidy (3.125 BTC × 144 blocks).
~50 BTC/day from transaction fees, which fluctuate with network demand.

At a spot price of about $110,700, this translates to nearly $99 million in daily revenue across the network. Spread across 1 ZH/s of hashrate, miners generate just $0.055 per terahash per day in gross revenue.

The distinction between subsidy and fees is crucial. While the subsidy is predictable, fees are volatile, and in early September fees have slipped toward multi-year lows, tightening margins for less efficient miners.

Profitability by Hardware and Power Costs

The profitability picture varies sharply depending on hardware generation and electricity rates:

New-generation rigs like the Antminer S21 XP (≈13.5 J/TH) remain profitable even with power costs of $0.10–0.12/kWh.
Mid-generation rigs such as the Antminer S21 (≈17.5 J/TH) can handle most industrial tariffs but face pressure above $0.13/kWh.
Older fleets like the Antminer S19 Pro (≈29.5 J/TH) hover near breakeven at $0.07–0.08/kWh and fall into losses at $0.10/kWh.

This divide means operators with access to subsidized or stranded energy — whether hydropower, flared gas, or discounted rates — retain strong margins, while those paying commercial tariffs with older machines face existential challenges.

Fees as the Swing Factor

Fees play a decisive role.

If daily fees double to 100 BTC, miner revenue rises by ~10%, restoring profitability for weaker fleets.

If fees shrink to 25 BTC, margins tighten further, and older hardware becomes unviable even at competitive power prices.

With fees sliding recently, miners are increasingly dependent on either cheap energy or cutting-edge efficiency to remain profitable.

Discount or Distress?

The paradox is clear. On one hand, Bitcoin looks deeply undervalued on a macro level: Energy Value indicates a fair price up to $168,000, echoing conditions before past bull runs. On the other hand, microeconomics are fragile: hashrate is at an all-time high, but miner margins are eroding due to declining fees and rising costs.

If inefficient miners capitulate, hashrate could decline, reducing Energy Value and easing difficulty for survivors. If demand for block space rebounds, higher fees could lift revenues across the board.

Looking Ahead

Edwards’ observation from early August remains striking: Bitcoin is trading at a deeper discount to value today than when it was $10,000 in 2020. With hashrate at historic highs and fees under pressure, the coming months will test whether Bitcoin’s undervaluation sets the stage for another rally — or whether miner stress forces a shakeout first.