Data from Glassnode shows Bitcoin mining has remained in an almost perfect equilibrium over the history of BTC, thanks to the difficulty feature.
Bitcoin Miners Have Spent Almost Equal Number Of Days In Profit As They Have In Loss
According to a new report published by the on-chain analytics firm Glassnode, BTC miners have been enjoying profits recently. To know whether Bitcoin miners are making profits or losses, the difference between their revenue and expenses is taken.
The firm defines the “mining revenue” as the sum of the total value of coins that miners are issuing (that is, the BTC they are getting through mining block rewards) and the transaction fees that they are receiving for handling transfers.
As for expenses incurred by these chain validators, Glassnode has assumed that the “mining difficulty” metric encapsulates info about all the mining-related metrics in one, and thus, can be used as a reliable way to calculate their costs.
The mining difficulty here refers to a feature of the Bitcoin blockchain that controls how hard miners currently find it to mine on the network. The reason this concept exists is that the BTC network aims to keep the production rate of BTC constant, no matter how much computing power the miners have connected to the network.
When, for instance, miners connect more mining machines to the network, the difficulty gets raised in the next periodic adjustment, so miners are unable to use this extra power for producing a higher amount of Bitcoin than usual.
Such a feature as the difficulty existing on the network has wide-reaching consequences for the BTC economy. As Glassnode suggests, “the net result is that mining is a hyper-competitive industry, where the cost of production for BTC is constantly approaching the break-even price for the average miner over the long-term.”
Now, to more easily see what impact the difficulty has had on the network, the firm has charted the number of profitable and unprofitable days that miners have experienced throughout the history of the asset.
Profitable and unprofitable days for the BTC miners | Source: Glassnode
Here, as mentioned before, the days are separated into profitable and unprofitable using whether the mining revenue was more or less than the cost of production (calculated using a model based on the difficulty) on any given day.
Interestingly, so far in the entire lifetime of Bitcoin, the average miner has spent 2,184 days enjoying profits, while they have spent 2,447 days in losses. This means that 47% of all days have been profitable, meaning that there is a pretty even split between profitable and unprofitable days.
“According to economic theory, a perfect market is one where supply and demand reach equilibrium, and the price of the asset approaches the point of cost (production price),” explains Glassnode. “Given how close these numbers are to a 50:50 condition, one could argue that the difficulty adjustment has done a remarkable job of targeting just such an equilibrium.”
BTC Price
At the time of writing, Bitcoin is trading around $27,700, up 2% in the last week.
BTC has moved sideways recently | Source: BTCUSD on TradingView