CoinShares reports the growth of bitcoin mining network by 90% in a year

What’s new? The bitcoin mining network grew by 90% in 2023, raising questions about its environmental sustainability and profitability, especially in terms of energy efficiency, analysts at investment firm CoinShares write in a new report. According to their calculations, the average cost of mining 1 BTC after halving the network this April will be $37 856, which could pose challenges for companies with high operating costs.

CoinShares’ report

Halving is code’s embedded cut in half of the reward to miners for a mined block on the blockchain, which occurs approximately every four years. Initially, miners received 50 BTC; on November 28, 2012, the number dropped to 25 BTC, on July 9, 2016, to 12,5 BTC, and on May 11, 2020, to 6,25 BTC. In April 2024, the award will be cut to 3,125 BTC.

What else is known? Analysts believe that mining firms Riot, TeraWulf and Cleanspark will be the most profitable post-halving position. It is likely that many others will have to cut SG&A expenses to reach break-even levels. Otherwise, they will continue to operate at operating losses and will be forced to liquidate their long-term bitcoin balances and other assets.

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Also, according to the report, the network’s hashrate increased by 104% year-over-year. Based on historical data, analysts predict that by April the indicator will return to a normal level in line with the trend line (450 EH/s), and during the next six months will decrease to 410 EH/s. After that, however, we should expect a sharp jump in hashrate to 550 EH/s by the end of this year. At the time of writing, the figure is 538,04 EH/s and the network complexity is 73,2 T, according to BTC com.

Despite the network’s growing power demands, its efficiency has increased by 28% over the past three years to 34 watts per terahash (W/NH) with a projected potential reduction to 10 W/NH by mid-2026 due to improvements in chip design and the introduction of more advanced asset mining equipment to the network.

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At the same time, network power demand reached a record high of 115 TWh year-on-year, adding 44% over the year. However, this increase, due to continued efficiency improvements, is relatively small compared to the hashrate increase. In addition, 53% of bitcoin mining energy now comes from sustainable and renewable sources, CoinShares noted.