Bitcoin Miners Eye Q4 Relief as Rising Costs and Network Shifts Put Pressure on Profits

Key Takeaways

• Bitcoin miners face a 13% increase in production costs due to rising network hash rates.
• The AI boom and Bitcoin treasury strategies are shifting focus away from mining expansion, contributing to profitability challenges.
• Despite rising production costs, Bitcoin miners may see profitability rise in Q4 due to a surge in Bitcoin’s price.

Bitcoin miners are seeing production costs climb due to a 13% increase in the cash cost to mine a single BTC , which hit $55,960 in Q3.

This surge in costs is largely attributed to the growing Bitcoin network hash rate, which has outpaced the growth of public miners’ hash rate.

As a result, public miners now represent a smaller share of the total Bitcoin mined, further increasing the cost of production.

Despite these rising costs, Bitcoin’s price surge above $100,000 is expected to offer some relief in Q4, potentially increasing profitability even as production costs continue to rise.

However, this profitability boost will be contingent on Bitcoin’s market price maintaining its momentum.

AI Boom and Bitcoin Treasury Strategies Shift Focus

A recent CoinShares report shed light on key factors affecting Bitcoin mining profitability, notably the artificial intelligence boom.

A key factor behind the rising mining costs is the shift in focus by many miners toward Bitcoin treasury strategies inspired by companies like MicroStrategy.

Public miners, such as MARA, have begun issuing debt securities to purchase BTC instead of expanding their mining operations.

This trend has been further fueled by the boom in artificial intelligence, which has diverted capital away from scaling mining operations to investing in AI infrastructure.

The growing trend of holding Bitcoin on balance sheets rather than reinvesting in mining operations is contributing to a slowdown in mining expansion, leaving miners less prepared for the increasing network hash rate.

Rising Costs Could Lead to Profitability Boost in Q4

While the cash cost for mining one Bitcoin has risen, reaching $55,960 in Q3, the overall cost, including non-cash expenses such as depreciation and stock-based compensation, now totals around $106,000.

However, the surge in Bitcoin’s price above $100,000 in Q4 could help mitigate these higher costs, leading to potential profitability gains for miners. The rise in Bitcoin’s value is expected to offset the rising cost of production, offering miners some financial relief.

That said, the risk of financial distress remains. A sharp decline in Bitcoin’s price below $90,000 could put miners such as Argo at significant risk, as their production costs exceed the current market value of Bitcoin.

Bitcoin mining share per company. Source: Coinshares