Bitcoin Hashrate Surges 9% Despite Expectations, Miners Face Profitability Challenges

Bitcoin's hashrate has reached an all-time high, with the seven-day moving average surging to 833 exahashes per second (EH/s), according to data from Glassnode. This represents a 9% increase from the previous level of 767 EH/s.

The rise in hashrate comes despite expectations of a slowdown in growth, as many mining firms had stocked up on equipment in anticipation of the April 2024 halving. However, the network has seen a significant rise in hashrate over the past 18 months, driven largely by institutional investment in mining infrastructure.

The surge in hashrate has coincided with mining profitability remaining relatively flat in recent months. One primary reason for this is historically low transaction fees, which have reduced miner earnings. In the bitcoin mempool, a high-priority transaction costs just 5 sat/vB ($0.69)—one of the lowest fee levels in recent years. With fewer transactions generating fees, miners are earning less from transaction fees, making it harder to offset operational costs.

The bitcoin network's long-term economic model relies on transaction fees gradually replacing the block subsidy as the primary source of miner revenue. However, the current market dynamics pose challenges to this model.

Looking ahead, the next difficulty adjustment is scheduled in four days and is projected to increase by over 6%, taking it to an all-time high and putting further pressure on miners.