It’s hot out, but what else is putting the heat on miners?
As the entire bitcoin industry has fallen into a slump after multiple “rekt” moments of centralized mishaps, the bitcoin networks still continue to churn thanks to its splendid design of Proof of Work. It is a positive feedback loop with an emergent consensus that solves the issues of centralization. But unfortunately, other crypto projects still haven’t figured out how to implement decentralization, ultimately leading to their downfall. With bitcoin, price movements and nefarious centralized players don’t matter. Proof of Work’s mining game is the ultimate universal player that will unilaterally continue to sing the tune of metal churning ASICs.
Mining over the recent few months has surely been affected by a variety of factors. Bitcoin price being one, but also demanding energy developments globally. All this has pushed the hashrates lower as profitability becomes squeezed for miner profit margins.
On-chain data also explicitly shows how mining difficulty has dropped more than 3 consecutive times.
Hashrates have subsequently dropped over the past 180 days to levels last seen in January of this year.
And as you guessed, miner revenue has dropped significantly over the same time frame.
Many miner insiders see this trend continuing over the next few months as many believe the bear market has started. Historically, bear markets can last at least 2 years at the minimum as many in the industry lose hope and bailout. But this time around may be different.
Another major factor is the drop in mining difficulty and hashrates is the sustained brutal heatwave punishing the US at the moment.
Actually, this heat wave is being felt globally everywhere, not just in the US. But it is being felt particularly heavy in most of Texas. This has prompted many miners to shut down operations in an attempt to lower overall electricity costs for residents as energy usage demand from ACs has skyrocketed.
It’ll be interesting to see how this mining fatigue plays out over the remainder of the year. The conundrum that we have is how the perceived effects of global warming are going to affect bitcoin mining. Miner rigs need to be cool but it’s getting hot out, a catch-22. Many global sustainability advocates continue to bash the side effects of bitcoin mining. The supposed reason China banned bitcoin miners in the country is that the emissions generated by bitcoin mining exacerbate climate change and are incompatible with the country’s goal of reaching carbon neutrality by 2060.
So if bitcoin mining is a culprit of climate change, then should it be banned? Or should some other energy-consuming industry take a step back on their usage? Is this a moral or political decision that should be decided by the market? Or by the government? The fact is that bitcoin, to some is useful, while to others it’s useless. In the long run, the market decides on what it considers useful and it is only a matter of time where the world will use bitcoin as the only monetary standard. When this happens, it’s only inevitable that bitcoin mining will increase not only in hashrates, but in miner rig count, mining farm count, and any other factor of bitcoin mining will increase.
But sometimes the critics of bitcoin mining get it wrong. It’s not a question that the media loves to throw dirt on the amount of energy wasted from bitcoin mining. But at the same time, critics naively try to argue whether bitcoin has any legitimate claim on our world’s resources. This question is a silly, utilitarian logic about which industries/people are entitled to use certain energy resources. Most people don’t reason like this and critics themselves are flabbergasted when they come to find how much energy other industries/activities use. Ahem…many other major industries use a lot more energy.
Also, critics naively extrapolate energy source usage to its corresponding CO2 emissions. As Nic Carter puts it, “energy is not globally fungible”. Essentially, not all energy is the same. This is similar to outsiders only looking at bitcoin for what its recent price action is doing. Bitcoin is not just about market price, nor is it just about CO2 emissions. It’s much more than that.
Most bitcoin mining rigs have a max temperature limit of around 90 to 100 degrees Celsius. Sure it’s getting hotter outside, many places hitting over 40 degrees celsius, which is affecting many bitcoin mines, but it’s safe to say that we are a long way from shutting down the whole network. In fact, we are nowhere close. Bitcoin is resilient in the fact that it listens to noone, and is affected by noone. It is the beautiful emergent consensus that makes it indestructible from critics.