Bitcoin Mining Electricity Cost Crisis: The History of Four Break-even Failures and Industry Elimination

The Bitcoin mining industry is not just a technological sector; it is highly influenced by operational profitability, which is largely determined by electricity costs. Whether mining equipment is profitable depends on the balance between Bitcoin price and miners’ operating costs (primarily electricity). Periods when this balance is disrupted have occurred four times in Bitcoin history, each forcing many miners to exit the market.

The Battle Between GPU Mining and Electricity Costs (2011-2015)

In the early days of Bitcoin mining, the industry was less specialized than today. In June 2011, Bitcoin’s price peaked at around $29.60, but during the subsequent bear market, it plummeted to about $2.

At that time, mining mainly relied on GPUs (graphics cards) and was operated at relatively low electricity costs. However, some miners’ operating costs are estimated to have reached $5-$10. When prices dropped to $2-$5, regions with high electricity costs and outdated equipment made mining unprofitable, leading to a significant decrease in network hash rate for the first time.

After Bitcoin surpassed $1,000 at the end of 2013, a long bear market ensued in 2014-2015, triggered by events like the collapse of Mt.Gox. During this period, the industry transitioned from GPU to ASIC mining machines (such as Antminer S1). The advent of new equipment brought higher efficiency but also sharply increased capital investment.

In 2014, the average mining cost for miners is believed to have ranged between $300-$600, primarily driven by electricity costs. When prices fell to $200-$300, miners with older equipment or operating in high-cost regions faced financial crises and were forced to shut down. The network difficulty was adjusted downward briefly in early 2015, reflecting the exit of hash power.

The ASIC Revolution and Accelerated Miner Attrition (2018-2022)

At the end of 2017, Bitcoin’s price surged close to $19,000, but by 2018, a severe bear market set in, with prices dropping to $3,200 in December. During this period, the industry became highly specialized, with mainstream equipment like Antminer S9 becoming common.

In regions with electricity costs of $0.06-$0.10/kWh, the average mining cost was estimated at $4,000-$6,000. Miners using older equipment like the S7 faced higher energy costs. When prices crashed to $3,200, the total network hash rate decreased by 15%-20%, indicating many high-cost miners exited the market. Difficulty levels declined consecutively in November and December 2018, marking the first back-to-back negative adjustments since 2011.

In 2022, the Bitcoin market experienced even more rapid changes. From a peak of $69,000 in November 2021, prices fell below $16,000 in 2022, amid macroeconomic tightening and the collapse of the FTX exchange and other crypto markets.

During this period, even the latest mining machines like Antminer S19 required costs of $30,000-$40,000 at electricity rates of $0.05-$0.08/kWh. Older S9 machines could have operating costs exceeding $50,000, with soaring energy prices further burdening miners. When prices dropped to $16,000-$20,000, many miners using older equipment or operating in high-cost regions lost profitability. Some publicly listed mining companies (such as Core Scientific) filed for bankruptcy.

Difficulty Adjustment Mechanism Sustains Mining Viability

Bitcoin’s mining industry can recover from unprofitability thanks to its difficulty adjustment mechanism. The Bitcoin network automatically adjusts mining difficulty approximately every 2,016 blocks (roughly every two weeks).

If hash power decreases significantly, difficulty lowers, improving mining efficiency for remaining miners. This prevents a “death spiral”—a vicious cycle where decreasing hash rate causes difficulty to rise, making mining less profitable, leading to further hash rate decline.

This mechanism has allowed the industry to overcome crises and has driven industry consolidation toward the most efficient miners.

New Mining Ecosystem Driven by Electricity Costs and Equipment Differentiation

Throughout the evolution of the mining industry, differences in electricity costs and equipment efficiency have become key factors in industry segmentation. High-efficiency mining machines and miners operating in regions with low electricity costs (such as Sichuan in China or Texas in the USA) tend to be more durable and resilient to market fluctuations. Conversely, small-scale miners and those in high-cost regions are more vulnerable to淘汰.

As of January 2026, Bitcoin’s price hovers around $82.96K, exceeding the operational costs of the latest machines like the S19 series (approximately $60,000 at $0.06/kWh). The upcoming fourth halving in April 2024 will reduce block rewards to 3.125 BTC, increasing revenue pressure, although the popularity of the Runes protocol and increased transaction fees partially offset this.

Currently, there are no clear signs of unprofitability, and the mining industry is forming a new equilibrium. The focus on low electricity costs and high-end equipment is intensifying, accelerating the shift from decentralized mining toward large-scale institutional facilities.

The history of Bitcoin mining is also a history of the battle between electricity costs and profitability. The industry has evolved through crises, continually progressing toward more efficient and sustainable models.