Bitcoin Mining Costs Surge 34% in Two Quarters Amid Rising Competition

The Bitcoin mining industry is currently facing substantial challenges, with production costs escalating and network hashrate reaching all-time highs. In May, transaction fees accounted for only 1.3% of block rewards, and by June, this figure had decreased to below 1%, marking a historic low. This decline in transaction fees places additional financial pressure on miners, who depend heavily on block rewards to cover their operational expenses. The hashprice, a metric that measures miner earnings per unit of hashrate, also dropped to $52 per PH/s before slightly recovering. This decline is due to the intense competition among mining firms and the rising energy costs.

The average cost to mine one Bitcoin has increased significantly, rising from $52,000 in the fourth quarter of 2024 to $64,000 in the first quarter of 2025. By the second quarter of 2025, this cost had surged past $70,000, reflecting a 34% increase over just two quarters. This surge in production costs is driven by the all-time high network difficulty, which has exceeded 126 trillion, and the rising energy prices. The network difficulty, a relative index compared to Bitcoin’s original difficulty, indicates how challenging it is to find a valid block on the network. A difficulty of 126 trillion means it is now 126 trillion times harder than at the beginning.

The hashrate, representing the network's computing power, has reached a 14-day average of 913.54 EH/s, just 10% short of the zetahash milestone (1,000 EH/s). This increase in hashrate is largely due to the rapid expansion by large mining firms such as MARA, CleanSpark, IREN, and Riot, which have reported significant increases in realized hashrate. While a higher hashrate strengthens the network, it also intensifies competition and reduces profit margins for miners. TheMinerMag attributes the rising hashrate to the scaling and energizing of new capacity by public mining companies.

In response to the rising costs and narrowing profitability, major mining firms are diversifying their revenue streams. For example, Riot doubled its Bitcoin-backed credit line with Coinbase to $200 million, and MARA allocated 500 BTC to Two Prime to expand its yield strategy. Other firms are exploring high-performance computing (HPC) and AI hosting to mitigate the impact of shrinking mining profits. This diversification reflects a growing trend among mining companies to adapt to the post-halving environment and pursue new narratives beyond simply mirroring Bitcoin’s price movements.

TheMinerMag's report highlights a growing divergence in the stock performance of Bitcoin mining companies, despite Bitcoin’s relatively stable price. This decoupling suggests that equity investors are increasingly evaluating miners based on their adaptability and ability to pursue new revenue streams. Firms such as IREN, Core Scientific, Bit Digital, and Cipher Mining have posted double-digit stock gains between May and June 2025, indicating that investors are favoring companies that can navigate the challenging mining landscape effectively. As the cost of mining Bitcoin continues to rise, mining companies face a critical decision: adapt or fall behind in the increasingly competitive industry.