The difficulty of mining bitcoin blocks decreased by 4.3317% to 29.897T on May 25. This is due to the automatic adjustment of the difficulty based on the computing power needed to secure the network. For instance, if the network's hash rate is high, the difficulty of mining a block decreases.
According to Jaran Mellerud, a researcher at Oslo-based firm Arcane Research, the decrease in difficulty was caused by the slow block production rate, triggered by the falling price of bitcoin.
The price of bitcoin has been decreasing over the past couple of weeks, which has forced miners to reduce their mining rigs' power consumption.
High computing power machines can handle more
According to Luxor and f2pool, the Antminer s9 of Bitmain has been making losses for miners. These miners typically pay more than 6 cents per kilowatt-hour of electricity. Some of the s9 rigs released by Bitmain have been in the market for over five years. These newer models, Antminer s19s, can deliver up to 256 TH/s of computing power.
High power computing power requires more power. However, according to a newsletter released by mining firm Compass Mining, miners with more powerful machines can still perform well even if their mining difficulty increases. For instance, if the price of bitcoin goes up to $30,000, the Antminer s19 should still remain profitable.
Given that the price of bitcoin is currently around $30,000, the break-even price for the Antminer s9 is approximately five cents per kilowatt-hour, which is significantly higher than the industry median of four cents. The decline in the number of mining rigs has caused the overall computing power of the Bitcoin network to decrease. Bitcoin's hash rate dropped from 229 EH/s to 209 EH/s last month.
According to Denis Rusinovich, a co-founder of CMG Cryptocurrency Mining Group and Maverick Group, miners who use the same hardware rigs as Bitmain s9 are likely to sell their machines due to the high energy costs. He noted that these miners might have to power off their rigs or even sell them. Ethan Vera, an operating officer at Luxor, said that mining farms might decide to sell their rigs since the S9s are still selling for around $150 to $300 per unit.
Rusinovich noted that retail miners are most likely to be affected by the unprofitability of mining rigs. They typically use more expensive packages and have a higher capital expenditure to purchase hardware. Retail miners are also required to upgrade their hardware to remain profitable.
Regardless, Rusinovich noted that the market downturn will harm industrial-scale operations, such as those that rely on debt to fund their operations. These projects often use hardware and bitcoin as collateral, and they were too optimistic about their potential.
The CMG Group CEO also suggested that some miners with long-term contracts might experience cash flow issues due to the current economic situation. These miners might have been too conservative in their risk assessments.
Solution for retail miners
According to Alejandro de la Torre, a former Poolin executive, retail miners have a few tricks. These include buying used machines and modifying their hardware to improve their performance. Torre also noted that these miners can potentially continue working despite the current market conditions by lowering their hashing rate.
A pseudonymous user named Econoalchemist told CoinDesk that home miners can still operate successfully despite the current market conditions. The pseudonymous home miner noted that it would take them several months to fully unplug their rigs due to the unfavorable market conditions.