Inside the Rising Direct Cost of Bitcoin Mining

In our previous piece, we took an updated look at bitcoin's mining profitability from an equipment perspective because the increasing network hashrate and recent market slump have significantly changed the hardware economics. Most of the old-generation equipment from the 2016 to 2017 era have become unprofitable at a global average energy rate. Since bitcoin's price has been consistently trading at the critical $30,000 level, the capitulation risk is now shadowing those who are running the second-newest generation equipment launched in the 2018 to 2019 period. 

For top-of-the-line models that were launched after the May 2020 Bitcoin Halving event, they still remain highly profitable. However, from a mining operation's perspective, companies can have a mix of new and old hardware models from one or more manufacturers. In addition, based on their geographic locations and the terms of their power purchase agreements, mining companies can have varying energy prices as well as other electrical and personnel costs for operating and maintaining their miners. Those factors all contribute to a company's direct cost for each bitcoin mined, which we broke down previously based on data up until the end of September 2021. However, based on our updated analysis, the direct cost of bitcoin among major public mining companies has risen sharply over the past two quarters, especially in the first quarter of this year.