- Miner fees accounted for an average of 4.38% of block subsidies in 2023.
- Hashrate rose dramatically in September after remaining stagnant over the summer.
Bitcoin [BTC] Mining remains one of the main foundations upon which the edifice of the Bitcoin blockchain stands. Responsible for bringing new coins into circulation and validating transactions on the network, the process has grown into a full-fledged industry at the time of writing.
Analysts and investors are keeping a close eye on the trends associated with the ecosystem, to speculate on the next steps of not only the original Bitcoin, but the broader crypto market.
Read BTC price forecast for 2023-2024
Network costs decrease on a quarterly basis
Hashrate Index recently released its Q3 Bitcoin Mining Report, which provides an overview of the changes that have taken place over the past three months. The report also noted some of the key performance indicators.
The share of transaction costs of all block rewards in the third quarter of 2023 was 2.7%. This represented a sharp decline compared to the 8.17% in the previous quarter.
Despite the quarter-on-quarter dip (QoQ), 2023 has been friendlier to miners. To date, miner fees have represented an average of 4.38% of block grants. In contrast, the average during the 2022 crypto winter was below 1.64%.
Source: Hashrate index
As indicated above, the decline in fees coincided with the steady decline in the number of Ordinals-related transactions. Last quarter’s gains were boosted by the explosive spike in such transactions in early May. However, since then there has been a clear decline. Ordinals’ share of compensation even fell to the lowest level since the first quarter of October.
The fees paid to miners for validating transactions remain one of the barometers of the mining sector. Miners use block rewards to offset costs associated with mining equipment and electricity. While some of it is fixed, large fluctuations in the share of transaction costs can negatively impact miners’ economics and turn them away from the industry.
Hash Rate increases after the summer break
The hashrate is a function of growing network traffic. A growing hashrate implies that miners need to invest in more computing power to validate blocks.
Reportedly, in 2023 there was a repeat of the previous patterns seen in the hashrate trajectory. Negative growth was observed for the summer months of June, July and August. However, since September the hashrate started to increase and this upward trend was maintained until May.
Source: Hashrate index
The report linked the decline in the summer months to voluntary curtailments by US-based mining companies.
The country’s Bitcoin mining hub, Texas, typically experiences extreme heat during these months. This results in a peak demand for electricity. As part of an agreement with the state’s power grid operator, mining companies shut down their facilities during this period to avoid overloading the power grid. In return, mining companies receive energy credits from ERCOT, which can run into the millions of dollars.
Hashish price development lower
Hashprice is a well-known mining metric that measures miners’ earnings per terahash. Simply put, it measures the profitability of miners. It depends on two factors: the market value of Bitcoin and the hash rate of the network. Although it is positively correlated with the price of Bitcoin, it responds negatively to changes in the hash rate.
According to the report, the average price of Bitcoin in the third quarter was $28,100, compared to the average of $26,350 in 2023 so far. The noticeable increase in market value offset the negative effect of the hashrate increase on the hash price.
Source: Hashrate index
That said, the hash price showed a downward trend starting in August. The average for September fell to $61.71/PetaHashes/day, reminiscent of the lows during the peak of the crypto winter in late 2022.
Is your portfolio green? Check out the Bitcoin profit calculator
ASIC prices hit rock bottom
It is common knowledge that specialized hardware, such as Application-Specific Integrated Circuits (ASICs), are used to mine Bitcoins today. Miners are investing in more advanced ASIC devices that consume less energy per TeraHash of computing power.
However, due to the drop in hashish prices, many mining rigs were lost, causing the price of machines to drop in the third quarter. Prices for machines in the lower efficiency category fell even further as miners rushed to cash in.
Source: Hashrate index
On a positive note, the third quarter witnessed the launch of the Antminer S21 by Bitcoin ASIC manufacturer Bitmain. The new model is the first ever Bitcoin mining ASIC to achieve an efficiency of less than 20 J/TH.
