The data suggests that the average cost of Bitcoin mining stands at around $86,700 currently. Here’s a history that suggests what’s next for BTC.
Bitcoin Average Mining Cost Currently Significantly Higher Than Price
In a new post on X, analyst Ali Martinez talked about what the average BTC mining cost looks like now. The Bitcoin network operates on a consensus model based on “proof of work” where verifiers calling miners compete against each other using computing power to get the next block in the chain faster.
This computing power naturally has its operating costs, and electricity is the most significant cost that miners have to pay, given that it is a constant cost. The incentive to capitalize on mining operations lies in the block rewards that these validators receive when they successfully add the next block.
Obviously, mining costs are different from location to location, as electricity prices are not the same everywhere. As such, the chart Ali cited on MacroMicro uses data provided by the University of Cambridge on BTC power consumption to find the average value.
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Below is the chart in question, which shows how the average mining cost on the Bitcoin network has changed over the past few years.
As seen in the graph above, the average cost of Bitcoin mining (in blue) was lower than the price of the cryptocurrency at the beginning of the year, but recently, the value of the former has increased and exceeded the latter.
The reason for this sudden increase is that there is another variable at play when calculating the average cost of mining Bitcoin: Mining, or the number of tokens that miners mine every day.
In general, block rewards are always fixed both in value and frequency, so the Network Output, which is nothing but the sum of block rewards mined per day, more or less is always fixed as well.
Certain events, however, do not match this. They are Halflings. These periodic events that occur approximately every four years permanently cut the block rewards in half.
The latest such event, the fourth in cryptocurrency history, took place back in April. Naturally, Halvings mean that the cost of mining 1 BTC increases significantly, as miners receive as many rewards as before after doing the same amount of work.
Therefore, it is not surprising that the cost of producing the coin has seen a sharp increase with the latest edition. Currently, this metric stands at $86,700, which means that according to the MacroMicro model, the average miner will be underwater.
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Based on the previous trend of the index, Ali identified a pattern that Bitcoin always follows. “Historically, BTC has always risen above its mining cost!” commented the commentator.
Therefore, if this pattern continues to hold for the current cycle, it may be a matter of time before Bitcoin passes the $86,700 mark.
BTC price
Bitcoin has gone through a pullback of more than 5% recently, which has brought its price below the $66,000 level.
Featured image from Dall-E, MacroMicro.me, chart from TradingView.com
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