(Bloomberg) -- An industry metric of how challenging it is to mine Bitcoin climbed to a record high with competition intensifying among the companies that mint the cryptocurrency.
Mining difficulty inched up 3.5% on Wednesday, according to data from crypto-mining tracker CoinWarz. The measure, which has been climbing steadily over time, tends to mirror expectations for directional price changes. Bitcoin has dropped about 10% in the aftermath of a software code adjustment in April known as the halving that slashed by half the possible revenue available to miners, pressuring the margins of many of the companies.
“The effect of the all-time high in difficulty, right on the back of the halving earlier this year, is making the outlook extremely challenging for many miners — especially those at the higher end of the cost curve,” said Christopher Bendiksen, Bitcoin research lead a CoinShares. If the current trends continue, “there are miners that will struggle to be cash flow positive, let alone profitable.”
Miners use specialized computers to secure the Bitcoin network by validating transaction data on the blockchain and earning rewards in the form of the token.
Shares of the largest publicly traded US mining companies have slumped this year, with Marathon Digital Inc. and Riot Platforms Inc. falling 31% and 54%, respectively.
At the same time, the price of Bitcoin has jumped 38%, hitting a record high of $73,798 in March amid optimism over surging demand for US exchange-traded funds holding the cryptocurrency. Bitcoin traded at around $58,000 on Wednesday.
Bitcoin’s hash rate — the amount of total computing power supporting the network — also hit an all-time high in September. In prior cycles, Bitcoin’s price often declined right after the halving, but then started to climb several months later to reach fresh record highs. Many industry participants expect a fourth-quarter rally, said Bobby Zagotta, chief executive officer of crypto exchange Bitstamp USA.
“It is clear that many miners are speculating on a significant increase in the Bitcoin price, and if that fails to materialize, there will be trouble ahead for some operators,” Bendiksen said.
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