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Bitcoin mining is a process where miners solve complex mathematical equations to produce new blocks and earn rewards. These equations are tackled with supercomputers running on massive amounts of electricity.
Recently, the price of Bitcoin mining in the United States increased drastically due to rising electricity costs. Quick Electricity reports that tariffs increased between January 2022 and January 2023. According to the report, they increased at an average of 10.71% per state, higher than the Consumer Price Index (CPI) increase of 6.4%.
Presently, it costs miners a minimum of $17,000 to successfully mine one BTC. This is an alarming increase compared to the $5,000 – $10,000 price level a year ago. Luckily, BTC mining profitability has risen, especially in states with lower electricity costs across the U.S.
Some miners recorded profit in Q1 of 2023 as Bitcoin touched the $30,000 price level.
Rising Mining Costs Affected Mining Corporations In 2022
Core Scientific found itself indebted to its energy provider, Priority Power Management. The U.S Bankruptcy Court for the Southern District of Texas allowed Core Scientific to transfer $20.8 million of equipment to Priority Power.
Core Scientific filed for bankruptcy in December last year, with Priority Power claiming the company owed them around $30 million. The Judge presiding on the case ruled on a $20.8 million settlement for Priority Power in the form of equipment that includes transformers and breakers.
Core Scientific was not the only corporation affected by the increased hash rates. Individual miners also struggled with bankruptcy in 2022, with some miners opting to sell their mining rigs at the height of the crypto winter.
US States And Bitcoin Mining Prices
New Mexico ranks as the cheapest and most profitable state for Bitcoin mining operations in the U.S. This record is for the first quarter (Q1) of 2023, and it costs miners $16,850 to mine one BTC. On the other hand, Hawaii is the most expensive state to mine BTC in the U.S. at approximately $114,590 per BTC.
Some states, such as Missouri, Arkansas, Montana, and Mississippi, have taken bold steps to protect crypto miners from excess taxes. In contrast, Texas has adjusted its utilities and tax codes to tighten restrictions for crypto mining companies.
Electricity tariffs and prices usually influence mining activities greatly. Currently, the South and Midwestern U.S. states are the most comfortable for miners for electricity bills. Moreover, the U.S. Energy Information Association (EIA) believes that energy prices will reduce and Bitcoin mining will become more profitable.
According to the report, a drop in demand for electricity by 1% is expected in Q2, 2023. They believe that additional generation from renewable energy sources and a reduction in the price of natural gas will lead to this drop.
The EIA believes that natural gas prices will stay below $3 in 2023 compared to 2022, where it sold at $6.45 on average.
Bitcoin Hash Rate Rises Indicating A Healthier Network In 2023
Bitcoin’s price experienced a drastic downturn in 2022 as the crypto winter swept the general crypto market. The bearish trend saws the asset dip from a high of $48,000 to below $15,000, leading to great losses among miners. The miners battled with rising operational costs and diminishing returns.
However, BTC posted more positive figures in Q1 of 2023 as the U.S. dollar price per terahash per second per day (TH/s/d) increased. The TH/s/d increased by 31% as Bitcoin touched the $30,000 price level before its current retracement.
Hashrateindex reported that the hash price of BTC in Q1 has increased steadily, with its lowest price recorded on January 1, 2023. The hash price increased by 31%, boosting profits for miners in areas with moderate electricity costs.
This profitability boosts for miners implies that more miner hardware is now in operation. Also, the 35% increase in Bitcoin’s hashrate increased its mining difficulty to 31.6% in Q1.
Check out our list of Best Bitcoin Mining Sites here.
Hosting Costs Stabilize In The United States
Hosting Marketplaces such as Blockware and Compass and other sites like Luxor’s ASIC Trading Desk and Hashbranch operate in the U.S. They provide retail access to Bitcoin mining hosts worldwide.
In the U.S. and Canada, hosting prices are more stable and decreasing compared to 2022. Currently, the average hosting cost for every state is lower than the breakeven cost of an Antminer S19j Pro.
However, the Bitcoin halving event in 2024 poses many questions about Bitcoin’s mining profitability. Miners’ rewards per block will reduce to 3.125 BTC post-halving.
Inscription Boosting Miners Transaction Fees
Bitcoin Ordinals have contributed to the growth process and price increase of the BTC network positively. Dune Analytics reports that inscription transactions gave miners BTC worth $3.73 million in Q1 2023. The total transaction fees paid to miners in Q1 is 1904.32 BTC worth $45.808 million.
Therefore, inscription accounted for 7.9% of the total transaction volume in Q1, 2023. The inscriptions helped boost the floor price of transaction fees, keeping them around 2.30% within this period.
Bitcoin Ordinals is a protocol system used for numbering satoshis giving each a unique serial number. These numbers make each satoshi trackable across transactions. Users can add numbers and other information making these satoshis unique.
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