Bitcoin Miners Battle Rising Costs With New Survival Strategies

Bitcoin miners face persistent challenges from rising network difficulty and fluctuating revenue, which are compounded by high upfront hardware costs and electricity expenses. These factors squeeze profit margins, making operational efficiency essential for a miner’s viability.

Representatives from Everminer, Bitdeer, and CleanSpark told BeInCrypto that miners are tackling challenges with diverse solutions, from optimizing their financial management and core operations to building new relationships with the energy grid and expanding into new computing markets.

The Squeeze on Profitability

Bitcoin miners face a challenging environment as the network’s difficulty reaches new record highs. 

This month, the difficulty climbed over 136 trillion, marking its fifth consecutive increase since June. The surge, caused by more computing power joining the network, comes as miner revenues weaken, with hashprice—the benchmark for revenue—falling to around $51, its lowest level since June.

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This combination of record difficulty and shrinking revenue is mounting pressure on profitability. 

September’s historically poor price performance exacerbates the situation, directly reducing miner rewards. This volatile shift sharply contrasts with the more profitable trend seen just a month prior in August, when miner margins strengthened as Bitcoin’s price outpaced the increase in difficulty.

For veteran Bitcoin miners, the sector’s current instability stems from diverse market pressures.

The Rising Cost of Staying Competitive

As Bitcoin mining becomes more competitive, what sets miners apart is their unique strategy for responding to threats and their approach to scaling their operations.

For miners who have been mining for long enough, they know that aspects like volatility are inherent in Bitcoin cycles. However, as Bitcoin usage increases and network difficulty becomes more complex, they must also learn how to handle sharply rising costs. 

Over the years, they’ve each developed carefully tailored operational strategies that are particularly critical for withstanding volatile market conditions.

Operations Solutions: From Debt to Discipline

In a discussion about his company’s financial discipline, Sudock spoke of CleanSpark’s application of a concept he described as “capital stewardship.” This strategy focuses on the responsible and disciplined management of a company’s assets to create long-term value. 

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The company self-funds its operations instead of relying on external investors or a debt-heavy balance sheet.  

To further amplify its earnings, CleanSpark actively manages its Bitcoin treasury, strategically accumulating Bitcoin during profitable periods.

In the meantime, to combat cost pressures, companies like Bitdeer have resorted to vertical integration, a strategy that involves bringing their supply chain under direct control, from production to distribution.

By leveraging their supply chain, Bitcoin mining companies can reduce their dependence on third parties.

Though issues like these can be treated through operational efficiency and appropriate planning, other external forces that a miner doesn’t necessarily have control over come into play. 

The Power of Geographic Diversification

Over the years, Bitcoin mining companies have learned the value of spreading their operations across the map. Policies and regulations can vary drastically between countries and even between states or provinces within a single country.

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This early experience taught Matrenitski a valuable lesson: spreading risk across regions.

Beyond using location to spread political risk, miners are now leveraging their geographical presence to become valuable partners to the energy grid.

From Energy Consumers to Grid Partners

Bitcoin miners have long been viewed as massive, round-the-clock energy consumers. However, industry leaders are redefining that narrative by positioning themselves as useful allies for the power grid, particularly as the system integrates more renewable energy sources.

This natural alignment with renewable energy and its low cost allows miners to take a more active role in stabilizing the grid. Based on this symbiotic relationship, miners are increasingly considered useful allies for the power grid.

If all else fails to protect against bad market conditions, some miners have also chosen to diversify into new markets.

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The Great Debate: Mining vs. High-Performance Computing

While some Bitcoin miners focus on the optimization of their current operations and financial models, a growing number are exploring a new frontier: diversifying into High-Performance Computing (HPC) and Artificial Intelligence (AI) services. 

Miners like Bitdeer and CleanSpark find such a pivot a natural extension of their existing pivot. 

Sudock agreed, adding: 

This potential pivot has become a key strategic opportunity and a point of strong debate within the industry.

Matrenitski argued that while both businesses consume much energy, their core business models fundamentally differ. 

Owning the computer equipment alone is no longer enough to make a profit.

Fortunately for miners, there are many ways to handle difficult market conditions. The best solution will depend on each company’s business model and leadership.