Bitcoin Miner Economics 101
To understand the crisis, you need to understand how mining works.
The Basic Formula
Mining Profitability = (BTC Mined × BTC Price) – (Electricity Cost + Hardware Cost)
Let’s break it down:
1. Revenue (BTC Mined)
- Block reward: 3.125 BTC per block (post-April 2024 halving)
- 1 block every ~10 minutes = 144 blocks/day
- Total daily issuance: 450 BTC/day
2. Cost (Electricity)
- Average mining rig (Antminer S19j Pro): 3,250W
- Running 24/7: 78 kWh/day
- At $0.10/kWh: $7.80/day per rig
- At $0.05/kWh (cheap): $3.90/day per rig
- At $0.15/kWh (expensive): $11.70/day per rig
3. Hardware Costs
- Antminer S19j Pro: ~$3,500-$5,000 (used market)
- Depreciation over 3 years: ~$4/day
- Maintenance/cooling: ~$2/day
Breakeven Calculation
For a miner with $0.08/kWh electricity (average):
| Cost Component | Daily Cost | |—————-|————| | Electricity | $6.24 | | Hardware depreciation | $4.00 | | Maintenance | $2.00 | | Total | $12.24/day |
Each S19j Pro generates ~$9-10/day at current hashrate and $70K BTC price.
Translation: Most miners are LOSING money right now.
—|————–|——————|——————-| | Jan 2024 | $45,000 | 550 EH/s | $63M | | March 2024 | $73,000 | 680 EH/s | $82M | | April 2024 (halving) | $65,000 | 640 EH/s | $41M | | Feb 2025 | $70,000 | 620 EH/s | $44M |
Key Observations:
- Hashrate peaked BEFORE the halving (miners front-ran it)
- Post-halving revenue dropped 50% (as expected)
- Hashrate has declined 9% since peak
- Revenue is down 47% from March 2024 highs
This is the early stage of capitulation.
Miner Sell Pressure
Public mining companies are bleeding:
| Company | Bitcoin Holdings | Avg Cost Basis | Current P&L | Status | |———|——————|—————-|————-|——–| | Marathon Digital | 27,562 BTC | $48,000 | +$606M | Selling BTC to cover costs | | Riot Platforms | 15,048 BTC | $32,000 | +$571M | Burning cash | | CleanSpark | 8,701 BTC | $26,500 | +$378M | Diluting shareholders | | Hut 8 | 9,102 BTC | $19,500 | +$459M | Debt-heavy |
Even the “profitable” miners are selling Bitcoin to pay bills. If price drops to $60K, they’ll be forced to liquidate holdings at a loss.
The Counterargument: Why the Death Spiral Won’t Happen
Okay, let me play devil’s advocate. Here’s why panic might be overblown:
1. Difficulty Adjustments Are Designed for This
Bitcoin’s difficulty adjusts every 2,016 blocks (~2 weeks) to maintain 10-minute block times.
If miners drop off:
- Difficulty decreases
- Remaining miners become more profitable
- Equilibrium is restored
Historical precedent: In 2018, Bitcoin dropped from $20K → $3K. Hashrate dropped 50%. Difficulty adjusted. Network survived.
2. Only the Weak Miners Die
Miners with >$0.10/kWh electricity should have been shut down long ago. Their capitulation is HEALTHY for the network.
The survivors:
- Cheap electricity ($0.03-$0.05/kWh) in Texas, Paraguay, Kazakhstan
- Stranded energy (flared gas, hydro, geothermal)
- Large-scale operations with economies of scale
After capitulation, Bitcoin mining becomes MORE efficient, not less.
3. Public Miners Are Not Representative
Public mining companies (MARA, RIOT, CLSK) are 20-30% of total hashrate.
The other 70% are private miners in China, Russia, Middle East who:
- Don’t report financials
- Have access to ultra-cheap energy
- Don’t need to appease shareholders
These miners can survive $40K Bitcoin. Maybe even $30K.
4. Transaction Fees Will Save Miners (Eventually)
Bitcoin block reward will eventually → 0 (year 2140).
Transaction fees will replace block rewards. In high-demand periods (2021, 2024 peak), fees spiked to 20-50% of miner revenue.
If Bitcoin adoption continues:
- More transactions = higher fees
- Higher fees = miner profitability even with lower block rewards
Price Predictions Based on Miner Economics
Scenario Analysis
Optimistic ($80K-$100K by end of 2026):
- Fed cuts rates → risk-on environment
- Bitcoin ETF inflows resume
- Miners survive, hashrate stabilizes
- Network security intact → confidence returns
Base Case ($60K-$75K range for 2026):
- Macro uncertainty continues
- Some miner capitulation (20-30% hashrate drop)
- Difficulty adjusts, equilibrium at lower price
- Bitcoin trades sideways until next catalyst
Pessimistic ($40K-$50K):
- Recession + risk-off
- Mass miner capitulation (40%+ hashrate drop)
- Forced BTC selling accelerates downtrend
- 12-18 month bear market before recovery
My Best Guess: We’re in the early stages of miner stress. If BTC stays below $65K for 3+ months, expect capitulation. But historically, that’s when smart money buys.
Key Takeaways
✅ Bitcoin mining is in crisis. Many miners are unprofitable at $70K.
✅ $60K is the critical level. Below that, mass capitulation is likely.
✅ Death spirals are survivable. Bitcoin has been through this before (2018).
✅ Miner capitulation = buying opportunity. Historically, bottom signals.
✅ Watch hashrate, not price. Hashrate bottoming = true bottom forming.
Are miners screwed, or is this just FUD? What’s your take on the death spiral scenario?
Featured image: Bitcoin hashrate chart showing recent decline Data sources: Glassnode, Blockchain.com, public miner earnings reports
Related Reading
- Why Bitcoin’s 4-Year Cycle Theory Is Dead (And What Comes Next)
- Why Michael Saylor Is Wrong About Bitcoin (A Contrarian Take)