05 Jul, 2024

Bitcoin Mining Industry Faces Profitability Crisis Amid Drop in Mining Difficulty

Decline in Mining DifficultyOn July 5, 2024, Bitcoin mining difficulty experienced a notable decline of over 5%, dropping to a quarterly low of 79.50 terahashes (79.5T). This significant reduction marks the largest since March and follows a period of elevated difficulty, which peaked at an all-time high of 88.10T between March and May. The current level reflects a slow but steady decrease from that peak.Bitcoin mining difficulty is a critical measure of the computational power required to solve the cryptographic puzzles that unlock new bitcoins. Adjustments occur every 2,016 blocks, roughly every two weeks. Over Bitcoin's lifetime, hashrates have generally increased, reflecting the growing complexity of mining operations.Historical Perspective and Current StateBack in 2014, hash rates were around 1.1 gigahashes, enabling even modest desktop PCs to mine Bitcoin. However, as adoption grew, hash rates increased significantly, surpassing the terahash mark by the end of 2017. As of July 6, 2024, mining difficulty stands at 79.5T, with the next adjustment anticipated soon. According to F2Pool, only ASIC rigs with a watts per terahash efficiency rate of 26 or better are profitable at current Bitcoin prices above $54,000.Profitability Challenges for Bitcoin MinersThe decline in mining difficulty provides some relief to miners struggling with rising production costs and declining profitability. According to MacroMicro, the average cost of mining one Bitcoin was approximately $83,668 at the start of June 2024, dropping slightly to around $72,000 by early July. These high costs have forced many miners to shut down unprofitable machines or exit the industry altogether.James Butterfill from CoinShares pointed out that Bitcoin prices were near the average production cost during the April halving event, with several miners incurring higher than average costs. F2Pool's data reveals that only the most efficient ASIC machines, such as the Antminer S21 Hydro and Avalon A1466I, are profitable under current market conditions, requiring Bitcoin prices to exceed $51,456 to break even.Impact of Reduced Mining DifficultyThe significant drop in mining difficulty could potentially increase the profitability of more mining machines. F2Pool estimates that at a Bitcoin price of $54,000, ASICs with a unit power efficiency of 26 W/T or lower would be profitable, assuming energy costs of $0.07 per kWh. Despite this, recent reports indicate that many miners are nearing capitulation, similar to levels observed during the FTX collapse. As a result, miners have been decommissioning inefficient machines and liquidating their holdings, with an estimated 30,000 BTC, valued at $2 billion, sold last month.Future of Bitcoin MiningThe current volatility and high production costs in the Bitcoin mining sector underscore the precarious nature of the industry. As inefficient machines are phased out and miners exit, those remaining face significant challenges. Monitoring changes in mining difficulty and Bitcoin prices will be crucial for assessing future profitability in the Bitcoin mining industry. The industry must navigate these tumultuous conditions, balancing operational costs with market dynamics, to ensure sustainability and potential profitability in the coming months.

01 Jul, 2024

Paxos Receives Full Approval From Singapore’s Central Bank to Issue Stablecoins

Quick TakePaxos’ Singapore entity, Paxos Digital Singapore Pte. LTD., will now be allowed to offer “digital payment token services” as a major payments institution, the stablecoin issuer said. Paxos also announced on Monday that it was partnering with Singapore-based DBS Bank for cash management needs and to custody stablecoin reserves. Paxos receives full approval from Singapore's central bank to issue stablecoins, partners with DBS BankPaxos received approval from Singapore's central bank to offer certain services that will ultimately allow the firm to issue stablecoins that are compliant with the country's stablecoin framework.Paxos' Singapore entity, Paxos Digital Singapore Pte. LTD., will be allowed to offer "digital payment token services" as a major payments institution, the stablecoin issuer said in a statement on Monday. “Stablecoins issued in accordance with standards set by a regulator like MAS [Monetary Authority of Singapore] – known for its rigorous regulatory standards – represent a significant step towards democratizing access to commerce and financial services," said Walter Hessert, head of strategy at Paxos. "Receiving approval from MAS is an important step for Paxos and our global enterprise partners to safely offer access to US dollars to more users around the world.”Paxos is authorized to issue stablecoins in the U.S., United Arab Emirates and now Singapore, the firm said. So far, 19 firms engaging in cryptocurrency services or digital payment token services have the MPI license from Singapore, including Paxos, Blockchain.com, Circle and Coinbase. To obtain an MPI license, firms have to have a base capital of $250,000 Singapore dollars as well as a "permanent place of business or a registered office" in Singapore, among other criteria, according to the central bank's website. Paxos also announced on Monday that it was partnering with Singapore-based DBS Bank for cash management needs and to custody stablecoin reserves. "This partnership further expands DBS’ wide-ranging involvement across the digital asset ecosystem, of which we have been a pioneer and innovator for several years now," said Evy Theunis, head of digital assets at DBS Bank's institutional banking group. DBS has been active in the crypto industry for years. The bank launched a fiat-to-crypto exchange in 2020 and later partnered with decentralized gaming virtual world Sandbox to create a metaverse experience.