A new study by cryptocurrency exchange BitMex reveals that bitcoin mining revenues fell by more than half in November.
At the beginning of the month, daily mining revenues were at $13 million. By the end of the month, that figure had fallen to just $6 million. The news comes after the bitcoin price collapsed by 36% in November.
The fall in prices means a lower incentive for miners, who are rewarded with bitcoin for keeping the system running.
The BitMex study also noted a 13% reduction in hash rate (a measure of computer power dedicated to the bitcoin blockchain). That’s the equivalent of 1.3 million Bitmain S9 miners going offline.
The Good News
With miners switching off their machines, there’s less competition. It should, theoretically, become more profitable to mine bitcoin with fewer miners competing on the network.
We have also just seen two major shifts in bitcoin “difficulty.” The Bitcoin algorithm is designed to readjust itself every two weeks (roughly) to compensate for the volume of miners.
The difficulty fell 7.4% on 16th November and 15.1% on 3rd December. These adjustments make it easier to mine bitcoin, thereby re-incentivizing miners.
Further reading: What is Proof of Work? – The Bitcoin Algorithm
Should We Worry?
Probably not. The fall in revenue is likely to knock out miners in regions where electricity is expensive. However, there are plenty of places around the world where mining is more affordable thanks to low energy prices.
We should also point out that most miners adopt a long-term strategy. As blockchain expert Andreas Antonopoulos explains:
“Miners have a much more long-term perspective, meaning that they have existing investments in equipment and they usually purchase electricity on long-term plans, they don’t pay it by the week. And therefore, if they have to wait to become profitable another three months and they have the equipment in place, they’re not turning it off.”