Bitcoin mining requires massive computing power and electricity, but what happens if the cost of producing Bitcoin is higher than the income obtained by miners?
Some operators will shut down their machines, while others will sell Bitcoin to cover their expenses, and companies with weaker financial positions may face bankruptcy. However, Bitcoin has a built-in mechanism that allows the network to continue operating even when mining becomes unprofitable for many participants.
Surprisingly, miners shutting down their equipment may ultimately increase the profitability of those miners who remain in the field.
Why has Bitcoin mining become unprofitable?
The income of Bitcoin miners comes from the newly issued BTC and transaction fees. After the Bitcoin halving in 2024, the block subsidy was reduced to 3.125 BTC, resulting in miners receiving fewer new coins.
Profitability depends on the Bitcoin market price, electricity costs, hardware efficiency, and network competition. When BTC declines or the difficulty of mining increases, operators' revenue may decrease, while electricity and financing expenses remain unchanged.
An important industry indicator is hashprice, which measures the expected daily mining revenue per unit of computing power. Assuming that hashprice is $40 per petahash per day, the cost of electricity alone is sufficient to determine which machines are still economically viable to operate.
What happens when Bitcoin miners shut down?
Unprofitable miners usually shut down older machines first or reduce their operating hours. Companies that are burdened with heavy debts or have to pay high electricity prices face greater pressure, as it is more difficult for them to cut costs.
Some operators sell their Bitcoin reserves or mining equipment to raise cash. Others shift their infrastructure to AI data centers, as the demand for electricity and computing power provides them with alternative income opportunities.
As miners disconnect, the total computing power of the Bitcoin network may decrease, and block generation will temporarily slow down. However, the network automatically adjusts the mining difficulty every 2,016 blocks, which is approximately once every two weeks under normal circumstances.
If the block generation speed is too slow, the difficulty will decrease, making it easier for the remaining miners to find blocks. They expect their share of mining rewards to increase, and they may be able to regain profitability without the need for a rebound in the price of Bitcoin.
If mining becomes unprofitable, can Bitcoin still survive?
Bitcoin can withstand a significant decline in mining activities, but the decrease in computing power is not entirely harmless. Lower computing power will reduce the resources required to attack the network, which may weaken its security.
Even difficulty adjustments cannot guarantee profitability. If electricity prices remain high, or if the price of Bitcoin continues to fall, some miners may still operate at a loss or permanently withdraw from the industry.
This kind of pressure is already reshaping the industry. Companies such as IREN and TeraWulf are expanding into AI infrastructure in order to diversify their revenue sources away from cryptocurrency mining.
After all, Bitcoin mining does not require every participant to be profitable. It needs a sufficient number of miners with economic incentives to continue processing transactions and ensure network security, and difficulty adjustments help to maintain this balance.
