Bitcoin Mining Costs Skyrocket in the US: From $5K to $17K in Just Three Years!

"New Market Analysis Reveals New Mexico as the Most Cost-Effective State for Bitcoin Mining, While Hawaii Ranks as the Most Expensive"

Bitcoin mining costs in the United States have surged since last year, with miners now needing at least $17,000 to produce one bitcoin. This is a significant increase compared to the $5,000-10,000 range miners needed a year ago, according to Bitcoin mining data resource Hashrate Index and Luxor. The rising cost of electricity across the US states has contributed to this increase. Between January 2022 and January 2023, the commercial electricity tariff surged at an average of 10.71% per US state, higher than the average consumer price index surge of 6.4%.

This increase in operational costs and lower returns led to active miners generating consistent losses. Coupled with Bitcoin’s downward performance in 2022, which saw a maximum drawdown from around $48,000 to below $15,000, miners were struggling to make ends meet. However, this changed in Q1 of this year as the miners’ hashprice rose 31% thanks to Bitcoin’s price recovery toward $30,000. Hashprice refers to the USD price per tera-hash per second per day (TH/s/d).

New Mexico emerged as the cheapest and, in turn, more profitable state for Bitcoin miners in Q1 at $16,850 to mint one BTC. On the other hand, Hawaii was the most expensive at around $114,590. Regionally, the south and the midwestern US states are the most attractive for miners in terms of electricity. Some US states, including Arkansas, Montana, Missouri, Mississippi, and others, have taken concrete steps to protect crypto miners from excessive taxes and regulations. However, Texas has amended its utilities and tax codes, bolstering restrictions for crypto mining companies.

The researchers anticipate the Bitcoin mining margins to grow further based on the U.S. Energy Information Association’s (EIA) expectations of energy price deflation. The agency expects the demand for electricity to drop by 1% in Q2, citing additional generation from renewable sources and cheaper natural gas prices. It further anticipates that natural gas prices will remain below $3 in 2023 from 2022’s $6.45 average.

Lower operational costs could help otherwise cash-strapped Bitcoin mining companies survive in 2023. For example, the stock price of Core Scientific, an already bankrupt Bitcoin mining firm, has jumped over 450% YTD. Similarly, the HI Crypto Mining Stock Index has soared by more than 100% this year, showing a return of investor appetite for mining socks. If the Bitcoin price was to increase by an additional 40% to reach $42k this year, most mining stocks would rise by more than 50% from today’s level, while the four-to-five biggest gainers would soar by more than 150%.

In conclusion, while Bitcoin mining costs have increased significantly in the US, there is hope for miners in the form of energy price deflation and lower operational costs. This could lead to increased profitability for miners and a resurgence in investor appetite for mining stocks. However, as with any investment, readers should conduct their own research before making any decisions.

Martin Reid

Martin Reid

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