BLOCKCHAIN MINING AT A SIX-YEAR LOW IN PROFITABILITY

Gorilla Pool Founder warns of financial risk for miners and explores what the future might look like

MIAMI, July 15, 2024 /PRNewswire/ -- Chief Bitcoin Historian and CEO & Founder of Gorilla Pool, Kurt Wuckert Jr. had some strong words of warning about a massive shift in Bitcoin mining economics as he spoke to an audience in Miami at Crypto Connect Palm Beach recently.

Kurt said, "I can't in good conscience ask you to spend your money on blockchain assets or mining equipment because of what is transpiring in the background right now. Mining SHA256 blockchains is near a six-year low in profitability although the price of BTC is still hovering around all-time highs."

For many years there has been the idea in Bitcoin that the price of bitcoin follows its hash rate as some kind of leading indicator. This notion has been particularly prevalent among proponents of BTC, who have long maintained that as more computational power is devoted to mining, the price of BTC will naturally increase. However, recent developments, especially those observed across BCH and BSV, have debunked this myth, revealing a more complex and (in some cases) manipulated relationship between price and hash rate.

While Bitcoin was never designed to have to deal with arbitrage among multiple SHA256 chains that refuse to orphan one another, the BSV blockchain has provided clear evidence that not all hashing behaviour is directly speculative. The fallacy that price follows hash is being exposed, particularly under the scrutiny of regulators who are becoming more adept at identifying market manipulation in the space.

Some evidence of this includes the fact that the largest hashers in the United States are now publicly traded with stock price being added to the calculation of total company profitability. Furthermore, simply being a large consumer of electricity by hashing also creates profit opportunities in power arbitrage, curtailment agreements and things like carbon credits, severely muddying the waters of Bitcoin's basic hashing economics.

This year has seen 54% of all BTC blocks mined by just two mining groups—Foundry USA (29%) and AntPool (25%)—while another 23% were mined by the third- and fourth-ranked pools. In other words, more than three-quarters of all BTC blocks can be traced back to just four mining groups.