Bitcoin Mining: Record in 2023, Challenges in 2024

After a slump in 2022, Bitcoin miners reported substantial profits in 2023, especially those with access to cheap energy. According to Compass Mining, companies like TeraWulf and Cipher Mining saw gross profits exceeding 60%. On average, well-known mining companies reported profitability of nearly 47% in the first quarter of 2023.

At the same time, the Bitcoin network's hash rate, a measure of its computational power, has shown significant growth over the past few months, reflecting a bullish market cycle. By January 11th, the hash rate had reached a record level of nearly 700 exahashes per second (EH/s), a significant increase from 265 EH/s in January 2023, indicating a more active and competitive mining environment.

However, the industry is not without its challenges. The anticipated Bitcoin halving event in April 2024, which will halve block rewards from 6.25 to 3.125 bitcoins, poses a significant threat. With fewer new bitcoins being mined, miners may struggle to cover their operational expenses, especially if Bitcoin prices and transaction fees do not rise proportionally. Rewards reduction could lead to less efficient miners exiting the market, affecting the entire network, and smaller miners may need to increase prices to maintain profitability.

The approval of 11 spot Bitcoin ETFs on January 10th injected optimism into the cryptocurrency market. This development is likely to influence Bitcoin prices and, consequently, mining profits. Let's explore these aspects further to gain a better understanding of Bitcoin mining's future.

In 2023, a significant milestone was reached as the average monthly hash rate surpassed 500 EH/s for the first time, indicating substantial investments in the mining sector. Approximately $5 billion was invested in equipment, doubling the network's hash rate from 250 EH/s in the fourth quarter of 2022 to 507 EH/s in the fourth quarter of 2023. These investments were accompanied by a corresponding increase in electricity capacity, estimated at 5.5 gigawatts.

Major mining companies achieved significant success, with Marathon's MaraPool mining 1853 BTC from 221 blocks in December 2023, far exceeding the 475 BTC mined in December 2022. Additionally, Marathon Digital's average hash rate increased by 18% compared to the previous month, reaching 22.4 EH/s, indicating sustained efficiency and mining power growth.

Throughout 2023, miners' average daily income from transaction fees increased by 400%, totaling approximately $2 million per day. According to a recent Messari report, Bitcoin miners received substantial venture investments in November 2023. Of the 98 cryptocurrency-related deals that month, approximately 90%, totaling $1.75 billion, went to Bitcoin miners. This profitability growth influenced Bitcoin's market dynamics, as miners were less inclined to sell their assets, reducing selling pressure on Bitcoin.

In 2023, Core Scientific generated a total of 13,762 bitcoins, with 1,177 BTC mined in December alone. Their revenue in December increased to $49.7 million, a 38% increase from November, driven by higher mining rewards and rising Bitcoin prices.