Bitcoin’s hash rate could double in a year, further squeezing miners’ profit margins

Bitcoin’s hash rate, or the computing power of the Bitcoin network, could rise by 120% in a year, but the price of Bitcoin would need to rise in order for mining companies’ profitability to not fall, a recent study suggests.
In a new report commissioned by the Fidelity Center for Applied Technology, digital asset advisory firm BitOoda described Bitcoin’s price as “a key factor in the continued growth of the hash rate.”
Here’s what the company said:
“The value of Bitcoin will decline over time, resulting in reduced profitability for (miners or miners), unless the price of Bitcoin rises enough to offset this effect.”
According to the report, miners’ daily revenue per PH/s is a function of the network hash rate and the price of Bitcoin. Therefore:
At current levels, if the Bitcoin hash rate is about 124EH/s and the BTC price is about $9,220, the revenue per PH/s per day is about $70;
If the hash rate grows to 260EH/s by the summer of 2021 as the company expects, then in order to maintain this $70, the price of Bitcoin will be around $19,500;
But when BTC reaches $10,000, miners will only earn $36 per PH/s — in this case, at an electricity cost of 4c/kWh, 1PH/s per day would cost $37 on a Bitmain S19-class platform and $133 on an S9-class platform. The company says the S9 rig needs to run below 0.5c/kWh to break even at a BTC price of $10,000.
BitOoda wrote that the Bitcoin network hashrate has the potential to exceed 260EH/s in the next 12-14 months. This could be the result of a “modest increase” in available power and miners upgrading their machines from the older S9 generation to the S17 and S19 class.
In fact, as the S19 upgrade cycle ends by mid-2022, the Bitcoin hash rate could rise to 360EH/s.

Bitcoin hash rate (30-day moving average) Source: Bitinfocharts.com

BitOoda said these estimates “are somewhat dependent on Bitcoin prices rising, or expected to appreciate by 25%-35% per year.”
The report adds:
Therefore, if the Bitcoin network hash rate rises, miners’ share of the total hash rate, and thus Bitcoin traffic, will decline. If the price of Bitcoin does not keep up with the growing hash rate, profitability will decline and the hash rate will fall significantly below our forecast, thus establishing a new equilibrium.”
The company said that if the price of Bitcoin remains flat or declines, then the dollar revenue per PH/s will continue to fall to the marginal cost, and further investment and hash rate growth may slow "meaningfully". (Tencent)