A year after the Bitcoin halving, how much does 1 BTC cost to mine?

This is a segment from the Supply Shock newsletter. To read full editions, subscribe.

We all know halvings double the cost of production, a fact the media tends to dress up as an existential threat to Bitcoin every four years.

Miners seeking profit must also contend with fluctuating difficulty and energy costs. But if the price goes up, at least they’d get more money for every coin they mine.

At $88,500, bitcoin is ahead by 36% since the halving. More importantly, it’s up 130% on the average price during the last phase of the prior halving cycle (more than double!)

As it goes, high prices attract more miners, which have driven bitcoin’s total hash rate to all-time highs alongside the difficulty.

In fact, while mining revenue is more-or-less in line with its five-year average, the difficulty is currently five times what it was in April 2021, and 40% higher than just before the last halving.

So, it’s harder than ever to generate bitcoins. But how much does it cost to mine 1 BTC right now? Always hard to say, with the answer highly dependent on electricity and other overhead costs, although Cambridge currently estimates $48,671 per coin.

Strong bitcoin prices have kept miner revenue almost on par with peak 2021 and 2024 bull markets (source: Blockworks Research).

Let’s use Marathon, the $4 billion mining giant responsible for about 7% of Bitcoin’s total hash rate, as an example.

In the three quarters leading up to the most recent halving, Marathon’s cost of mining revenues were $224.95 million, according to its SEC filings.

Marathon mined in total 10,542 BTC over the same period, which puts the estimated cost of producing each coin at just under $21,500. Bitcoin traded at $39,300 on average over that time, implying potential profit of $17,800 per coin.

Across the third and fourth quarters of last year, Marathon’s estimated cost of production using the same method works out at $43,270 — correctly doubling since the halving and in line with Cambridge’s estimate — against an average trade price of $72,250. That suggests potential profit of nearly $29,000, which is even higher than before the halving.

(Marathon CEO Fred Thiel said in February that Marathon’s direct energy cost per bitcoin for last year was $28,801 overall, although that would include some of the previous epoch, before the cost of production doubled. Marathon profited over half a billion dollars in Q4 2024)

One year on from the halving and based on Marathon’s figures, the bitcoin block subsidy is still lucrative enough, at least at current prices for the most well capitalised operations. Other miners might sometimes run at a loss, going by Luxor’s Hashrate Index, which points to some of the lowest profitability on record. Understandable, given five halvings have passed.

In any case, Bitcoin has three years left to double in price to counteract the next one. Plenty of time.

Money is speech

“I’m sure that in 20 years there will either be very large transaction volume or no volume.”

Satoshi said that on Valentine’s Day in 2010 — a little over 15 years ago.

It was an addendum to a comment about the necessity for transaction fees in a system that sees block rewards cut to zero over time. “In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes.”

So, how close is Satoshi to the truth, less than five years out from his hypothetical?

Monthly transfer volume has fallen in recent months but is still way up 2023 (source: Blockworks Research).

Bitcoin processes more than 11.5 million transactions per month, up from under 8 million in early 2022, converting to $1.8 trillion BTC in volume on average.

On one hand, that might be “very large,” like Satoshi predicted, but over 98% of miner revenue still comes from the block subsidy.

Rizzo’s view, on this day

You might hear the phrase “Bitcoin bubble” a lot these days, what with prices surging over $100,000. A look back at media articles from the past, however, and not much has changed.

On Reddit, I posted this chart as a reminder of just how long the trope has lasted. In fact, the above chart was posted by Coin Center founder Jerry Brito, 14 years ago.

There he wrote about how even if Bitcoin died, the technology was here to stay. He was right with one caveat — the technology was Bitcoin.

Source