Earlier this year, fears were rife on Twitter of a Bitcoin "miner capitulation" in response to the March price crash and the block reward halving just months later. After the halving, certain analysts argued that the median miner was in the red as long as bitcoin traded below $14,000 USD.
Months after the halving, though, it appears that these fears were overblown. On August 24, Bitcoin's network difficulty rocketed higher to a fresh all-time high, with miners indicating they remain profitable.
The mining difficulty is a moving value that determines how hard it is for miners to generate a Bitcoin block; the difficulty adjusts every 2,016 blocks (~two weeks) to ensure there is an interval of approximately ten minutes between each block.
The slight 3.6% increase in difficulty means that over the past 2,016 Bitcoin blocks, miners have been generating blocks slightly faster than the 10-minute target block time.
This means that on balance, miners are making less than they were prior to the adjustment. But the difficulty adjustments are necessary to ensure Bitcoin maintains its stable block time, which in turn ensures the long-term scarcity of bitcoin.
"Over the past 30 days the value of hashrate increased by 18% to 9.1 cents a TH/Day. This was caused by a run up in Bitcoin price, stable difficulty and increased transaction fees."
With higher income due to the 30% increase in Bitcoin's price and an uptick in the cost of transactions, Vera explained, companies are investing heavily into more efficient mining equipment from manufacturers:
"At this level, mining economics still make sense for efficient operation, as shown by companies like Riot, Marathon Group and Bitfarms investing heavily into new-gen equipment. These mega companies [are] placing 1000 unit + orders from the manufacturers, it is soaking up all exported supply."
Just last month, it was revealed that Core Scientific bought 17,600 units of Bitmain's newest SHA-256 machines, which can mine the Bitcoin blockchain. These 17,600 units, if all turned on, represent a material portion of the Bitcoin hash rate. Other companies have also bolstered their operations according to a BTC Times source.
Vera also clarified to the BTC Times that the concerns about floods in the Sichuan province destroying the Bitcoin mining ecosystem are overblown. While he did note that around 8% of the network hash rate temporarily turned off because "Sichuan [is] where the majority of the world's hash rate is situated," he said that Chinese Bitcoin miners are recovering:
"The situation is improving and hashrate has started to come back online. It has been one of the worst rainy seasons in recent history in Sichuan but is almost done."
With the rainy season in China coming to a close, Bitcoin's difficulty may continue to push higher as miners in the area feel confident to bolster their operations by activating more equipment once again.