Rising Mining Difficulty Squeezes Profits for Bitcoin Miners
Bitcoin miners experienced a sharp drop in revenue in August 2024, their lowest earnings since September 2023. Data from Bitbo revealed that miners generated $827.56 million last month, a significant decrease from July’s $927.35 million.
The drop represents a 10.5% decline month-on-month, marking a continued downward trend in miners’ earnings throughout 2024. The revenue slump can be attributed to several factors, notably the rising difficulty in mining BTC.
In August, the mining difficulty reached a record high of 89.47 trillion, up from 86.87 trillion in July. This increase has made it harder for miners to process transactions successfully. The decline in earnings is also reflected in the number of Bitcoins mined in August.
Miners produced 13,843 BTC, down from approximately 14,725 BTC in July. This reduction is partly due to the Bitcoin halving event in April, which cut mining rewards by 50%. As a result, miners now receive 3.125 BTC per block, compared to 6.25 BTC before the halving.
Transaction volumes have also contributed to the revenue drop. Although the average number of daily confirmed transactions peaked at 631,648 on July 31, it fell to 594,871 by the end of August, according to data from Bitbo and Blockchain.com.
Bitcoin Miners Explore AI
The combination of increased difficulty, lower transaction volumes, and reduced block rewards has forced some miners to explore alternative sources of income. In particular, some have shifted their computing power to artificial intelligence (AI) applications, securing deals that have reportedly netted them billions of dollars.
The trend of falling revenue has been consistent since March 2024, when Bitcoin miners earned nearly $1.93 billion during a period of high market activity. That month, BTC’s price reached an all-time high of over $73,500.
However, by August, the price dropped to around $57,000. This decline in Bitcoin’s value has further strained miners’ margins, leading to their worst revenue month in nearly a year.
Whales Accumulate More Bitcoin
Meanwhile, Bitcoin whales are accumulating more of the cryptocurrency as smaller traders sell their holdings. This trend has resulted in a significant increase in the number of wallets holding 100 Bitcoin or more, reaching levels not seen in the last 17 months.
Recent data from blockchain analytics platform Santiment revealed that over 283 wallets crossed the 100 BTC mark in August alone. This surge brings the total number of such wallets to 16,120, marking a notable shift in the distribution of Bitcoin among large holders.
The increase in Whale’s Bitcoin purchases comes at a time when retail traders have been selling their BTC, inadvertently creating opportunities for larger players to increase their holdings. Adam Back, CEO of Blockstream and inventor of Hashcash, noted that whales have been consistently buying since BTC’s price dipped from $62,000 to around $58,000 on August 28.
Back pointed out that whales purchase Bitcoin at a rate that matches the daily mining output, a clear indication of their intent to accumulate. In addition to the growth in wallets holding 100 BTC or more, there has been an uptick in the number of wallets holding at least 10 BTC, often referred to as “sharks.”
Santiment estimates that wallets containing between 10 and 10,000 BTC have collectively accumulated over 133,000 coins in the last 30 days, a haul worth more than $7.6 billion at the crypto’s current price.
Rising Whale Activity Linked to Market Fear
Santiment attributes the rising whale activity to the impatience of smaller traders, who are offloading their assets at a loss. As these retail traders exit the market, whales are swooping in to buy up BTC at what they consider discounted prices.
The Crypto Fear & Greed Index, a measure of market sentiment, has remained in the “Fear” range throughout August, with an average rating of 37. Regardless of market direction, these larger holders seem poised to take control of a growing share of the Bitcoin supply.
Vivek Sen, founder of Bitgrow Lab, noted that significant whale activity has historically been a precursor to new all-time highs for BTC. The last major accumulation by whales was followed by Bitcoin reaching a new peak. Hence, the question is, could this whale accumulation lead to another BTC price peak?
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