In fact, Bitcoin mining has experienced its toughest year in 10 years

Bitcoin miners have been on a tear in 2019, pushing hash rate and difficulty to all-time highs, but mining pools have proven to be severely underperforming for a significant period of time.

Price drop hasn’t deterred Bitcoin miners

Most large mining companies are mining Bitcoin at a loss this year due to unfavorable market prices. However, this has not led to capitulation as previously expected. Instead, miners are doubling down on their efforts to get the last 12.5 BTC rewards before the halving next year.

Looking back at 2019, there were two periods when miners continued to compete for rewards despite prices falling below the breakeven point.

The last few months of the year are also one of the times when mining occurs below the break-even point. However, past miners have also achieved high potential returns, and some miners may decide to hold on to these Bitcoins. Newly produced Bitcoins also have their own value due to the lack of history. However, the halved rewards may also cause miners to limit their activities as they cannot even accumulate BTC.

In 2019, miners also had access to the futures market, which may have offset some of the losses from selling in the spot or over-the-counter markets. Now, with the launch of futures options, some Bitcoin miners may try to hedge this risk.

Break-even price is hard to estimate

The Bitcoin network’s hash rate has been fluctuating, recently dropping to 8.8 quintillion hashes per second from 10.1 quintillion a day ago. The largest contributors remain the largest mining pools in China, which still rank high on block explorers.

Some of the older mining pools that invested in S9 ASICs may still be viable at this point and actually have a higher ratio between payouts and the Bitcoin market price.

There is no consensus on the breakeven price, but the current assumed breakeven price is between $7,000 and $8,000. However, with cheaper electricity prices, miners have the ability to produce BTC at a much lower price. At $0.05 per kWh, this would make the breakeven much lower. A rough estimate puts the breakeven point for Chinese hydroelectric power plants at $3,500.

Historical prices show that Bitcoin’s price is also close to its mining breakeven point, regardless of the length of time.

Even at current BTC levels of around $7,200, mining is still 15 to 20 times higher than the hash rate in December 2017 during BTC’s peak appreciation.