The Herald Business launches Crypto Insight, a column featuring expert perspectives on digital asset policy, technology and markets. It offers in-depth analysis of digital asset market conditions, the latest global developments and the push toward institutional adoption. Crypto Insight aims to serve as a compass for understanding complex market structures and gauging the future value of digital assets.

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Hashrate — the metric used in the virtual asset industry to measure Bitcoin mining capacity — had climbed steadily for six years, posting double-digit percentage gains every year on a first-quarter basis. That upward trend reversed late last year, and by July 11 the hashrate had fallen roughly 15 percent from its level at the start of the year. Two forces drove the decline: a drop in the Bitcoin price and a shift of power and capital toward AI projects.

The financial pressure on miners has been severe. The average cash cost for a publicly listed mining company to produce one Bitcoin reached about $79,995 in the fourth quarter of last year, while the Bitcoin price this year has fallen into the $60,000 range. At last year's fourth-quarter cost levels, each coin mined would generate a cash loss of roughly $19,000.

In response, a growing number of mining companies have redirected their equipment, power infrastructure and capital toward AI and high-performance computing (HPC) operations, and some have sold off their Bitcoin holdings to raise liquidity. Bitdeer, for example, sold virtually all of its Bitcoin reserves in February. In the first quarter of this year alone, six major publicly listed mining companies sold a combined 32,000 Bitcoin — a quarterly record.

Does this mean the mining industry is in terminal decline? Not necessarily. A key feature of Bitcoin is its difficulty adjustment mechanism, which automatically raises the network's mining difficulty when total computing power increases and lowers it when computing power falls. From January through July this year, the difficulty was adjusted 15 times, and nine of those adjustments were downward.

When mining difficulty falls, operators who keep their equipment running capture a larger share of rewards, because the same computing power can yield more Bitcoin. When struggling miners shut down their rigs, the remaining operators benefit proportionally — the pie is divided among fewer players.

CoinShares has estimated that when hashprice — a measure of mining revenue — falls to around $30 per petahash per second (PH/s) per day, roughly 15 to 20 percent of global mining capacity operates below breakeven. Operators using older equipment or paying higher electricity rates are the first to be pushed out. Ultimately, the line between profit and loss comes down to power costs and the energy efficiency of mining hardware.

Power costs in particular are reshaping the geography of the entire mining industry, not just individual company balance sheets. US-listed mining companies held a global hashrate share of about 41 percent early this year — an all-time high — but as they pivot toward AI, countries with lower electricity costs are gaining ground. Kyrgyzstan, which has overhauled its mining regulations, more than tripled its global hashrate share year-on-year. Paraguay now ranks fourth with a 4.7 percent share, and Ethiopia has settled into eighth place at 2.4 percent.

With power now the decisive factor, the advantage belongs not to whoever entered the market first but to whoever has secured cheap electricity and efficient equipment. The mining industry is shifting toward a market where power costs and hardware energy efficiency determine profitability more than timing of entry. As competition thins and difficulty eases, operators with the right combination of power, equipment and operational capability stand to seize new opportunities.


kyoung@heraldcorp.com