Bitcoin (BTC) Mining Expenses Rose Sharply in Q4 2024, Averaging $137,018 per Coin

Bitcoin (BTC) mining expenses rose sharply in the final quarter of 2024, with CoinShares reporting that the total average cost

Bitcoin BTC/USD mining expenses rose sharply in the final quarter of 2024, with CoinShares reporting Thursday that the total average cost to produce one Bitcoin, including non-cash items, climbed to $137,018.

This figure includes depreciation and stock-based compensation, offering a more comprehensive look at the financial stress facing miners despite the strength in Bitcoin's market price.

According to CoinShares’ Q4 2024 Mining Report, the weighted average cash cost to produce a Bitcoin among publicly listed miners increased 47% quarter-over-quarter, shifting from $55,950 in Q3 to $82,162 in Q4.

Excluding outliers like Hut 8 HUT, which saw costs skewed by a large deferred tax expense, the cash cost averaged $75,767.

"The report provides a deeper dive into the financial performance of the Bitcoin mining sector, revealing a more complex story than surface-level analysis might suggest," the report stated.

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What Happened: Throughout Q4 2024, Bitcoin's price hovered around $82,000, which, when combined with the average cash cost of $75,767, might lead some to conclude that most miners were operating profitably.

However, CoinShares emphasizes that including non-cash expenses, such as accelerated depreciation of mining equipment and stock compensation, paints a different picture.

When factoring in these additional expenses, the total average cost to produce one Bitcoin across the main listed miners reached $137,018 in Q4 2024.

"This disparity between headline profitability and actual financial sustainability is a key finding of the report and underscores the unique challenges faced by the Bitcoin mining industry," the report stated.

ASIC Depreciation And Competitive Pressures: A major driver of these costs is the rapid depreciation cycle of ASIC (application-specific integrated circuit) hardware, which must be updated frequently to remain competitive. Unlike gold mining equipment that retains utility over long periods, Bitcoin mining hardware quickly becomes obsolete, necessitating continuous reinvestment from firms.

"This dynamic results in a unique financial strain. Miners are trapped in an ‘ASIC hamster wheel'—a constant need to replace hardware driven not by wear and tear, but by technological obsolescence," the report explained.

The report highlighted that Bitcoin mining differs significantly from gold mining in terms of economic resilience. While gold mining typically features more stable production forecasts and longer depreciation timelines, rendering it less susceptible to rapid shifts in the competitive landscape, the report noted that "in the Bitcoin domain, the actions of competitors exert a strong influence on mining outcomes."

For instance, if one miner increases capacity significantly, it can have a substantial impact on the relative output of other miners, even if they maintain the same level of operations.

Hashrate Acceleration And Forward Guidance: Despite these rising expenses, Bitcoin's network hashrate reached a record 900 exahashes per second (Eh/s) at the end of 2024, placing it slightly ahead of CoinShares' previous projections.

The firm expects the network to cross the 1 zettahash per second (Zh/s) mark by July 2025, with hashrate forecast to hit 2.0 Zh/s by early 2027.

CoinShares attributes the increase to strong price action and favorable policy developments, which motivated miners to accelerate infrastructure deployments despite the rising capital and operational costs.

Structural Challenges And Industry Shifts: CoinShares also noted that the mining sector is becoming increasingly saturated, with valuation multiples compressing across publicly listed firms. This reflects the growing consensus that Bitcoin mining is now a zero-sum game, where gains in hashrate by one miner come at the direct expense of another’s market share.

In response, several miners, including Core Scientific CORZ and Cipher Mining CIFR, are diversifying into AI infrastructure and high-performance computing (HPC) services to build more stable and scalable revenue streams.

CORZ has already allocated 43% of its energy capacity to AI-related operations, while CIFR plans to dedicate 35% of its future buildout towards AI and HPC, aiming for a total of 1800 megawatts (MW) in 2025.

Miners Who Cut Costs In Q4: While most miners saw higher costs in Q4, CleanSpark CORZ, Iren IREN and Cormint managed to reduce their cost of revenue per Bitcoin mined.

CleanSpark achieved an 8% reduction thanks to fleet efficiency improvements and increased uptime, Iren saw a 39% decrease thanks to lower energy prices and greater efficiency, and Cormint experienced a 44% decline due to increased fleet uptime and lower input costs.