From cointelegraph by Damian Chmiel
Publicly listed Bitcoin (BTC) miners from Wall Street are grappling with escalating production costs, with the average expense to mine one token reaching $49,500 in the second quarter, highlighting the growing challenges in the cryptocurrency mining sector.
The increasing costs, driven by rising electricity prices and record-high mining difficulty levels, have forced many mining operations to pivot their business strategies. When accounting for depreciation and stock-based compensation, the total cost surges to $96,100 per bitcoin, putting significant pressure on miners' profit margins.
“The Bitcoin mining industry has faced significant challenges this year, with revenues and hash prices declining,” CoinShares commented in the newest report. Overall market activity “has pushed mining difficulty levels to new highs, intensifying the issue of high production costs.”
Mining companies are implementing various approaches to combat these rising expenses. For example, TeraWulf has positioned itself as an industry leader in cost reduction, achieving production costs of $18,700 per Bitcoin through strategic power contracts, including a fixed-rate agreement with a nuclear facility at $0.02 per kilowatt-hour. Their success stems from a fixed-cost power agreement with a nuclear facility at $0.02/kWh, valid until August 2027.
BitFufu has taken a different approach, opting to acquire a majority stake in an 80-megawatt (MW) cryptocurrency mining facility in Ethiopia. The US company aims to leverage East Africa’s lower-cost energy to counter diminishing profit margins in the BTC mining industry. According to the company’s latest report, its production costs surged by 170%.
In response to these challenges, mining companies are increasingly diversifying their revenue streams, with several incorporating artificial intelligence (AI) operations into their business models. Core Scientific has emerged as a pioneer in this transition, securing a significant 12-year, $8.7 billion deal with Coreweave for AI infrastructure.