Analysis of the impact of currency price surge on Bitcoin mining

In today's ever-changing financial markets, the fluctuation of currency prices not only affects traditional financial assets, but also profoundly changes the ecology of digital currencies, especially the specific field of Bitcoin mining. When we explore whether the surge in currency prices will affect Bitcoin mining, we are actually analyzing a strong economic symphony involving multiple factors such as supply and demand, miners' costs, technological progress, and market psychology.

As the global economy recovers, central banks' monetary policies have become increasingly loose, leading to rising currency prices. This phenomenon is not only reflected in legal tender, but also affects the market performance of digital currencies. As the digital currency with the largest market value, the complexity of Bitcoin's mining process and cost structure make this field particularly sensitive to currency price fluctuations. Bitcoin mining requires not only high-performance computing equipment, but also a large amount of electricity resources, so its economic benefits are directly affected by currency price fluctuations.

However, the surge in currency prices has also led to an increase in mining costs. First, the price of mining machines has risen, especially the surge in demand for high-performance mining machines, resulting in a market supply shortage and naturally rising prices. In addition, the rising cost of electricity is also a factor that cannot be ignored. As the popularity of Bitcoin mining rises, the consumption of electricity is also increasing, especially in some areas with tight electricity resources, miners need to face higher electricity bills. For example, in some provinces in China with higher electricity prices, the mining costs of miners have risen sharply, and some miners have even had to choose to shut down or move to areas with lower electricity prices.

At the same time, the difficulty of Bitcoin mining is constantly adjusting. The Bitcoin network automatically adjusts the mining difficulty every ten minutes to ensure the stability of the block time. When the number of miners increases, the mining difficulty increases, which means that the Bitcoin reward for each miner will decrease. In this case, if the currency price fails to continue to rise, some miners may exit the market due to high costs, causing fluctuations in mining computing power.

The current status of Bitcoin mining is also affected by the policy environment. Take China as an example. In 2021, the Chinese government implemented a severe crackdown policy on Bitcoin mining, forcing a large number of miners to shut down their equipment and move to other countries. The introduction of this policy not only affects the living environment of miners, but also has a direct impact on the market price of Bitcoin. In the case of an uncertain policy environment, miners have become more cautious in their investment decisions and may choose to mine when the currency price is relatively stable.

In this context, market psychology also plays an important role. As the price of the currency rises, investors' enthusiasm rises and market confidence increases, further driving the demand for Bitcoin. This increase in demand, in turn, stimulates miners' enthusiasm for mining, forming a virtuous circle. However, this cycle may also be broken in the fluctuation of market sentiment. For example, when the market experiences a sharp correction, miners may reduce mining or even exit the market for fear of losses, resulting in a decrease in computing power, which in turn affects the security and stability of the Bitcoin network.

In general, the surge in currency prices has many impacts on Bitcoin mining. It may bring opportunities as well as challenges. For miners, how to seize opportunities and achieve profits in the ever-changing market is a question that requires in-depth thinking. For investors, understanding the dynamics of the mining market and choosing the right investment opportunity will allow them to remain invincible in the wave of digital currencies.

In this process, personal judgment and market dynamics are intertwined, forming a complex and challenging situation. How the future Bitcoin mining market will find a new balance point in the fluctuation of currency prices is worthy of our common expectation and attention.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

As the price of Bitcoin continues to rise, the gap between its market price and production costs is getting bigger and bigger. Just like there are many factors that affect exchange rates, production costs can vary greatly depending on location, energy costs, software and hardware. Mining mainly depends on efficiency, while price depends on supply and demand.
Braiins, who run the world's first mining farm SlushPool and specialize in producing software to help miners improve efficiency, contributed this article to help understand the inner workings of the Bitcoin mining business. Read on to discover from the source how Bitcoin's fundamental value translates into miners' profits, as well as the current and future competitive landscape.
As with any asset, the cost of buying one Bitcoin carries a premium on top of the cost of producing one. Mining technology is highly specialized, expensive, and risky to set up due to the volatility of asset prices. Electricity costs also vary by location, making the industry highly competitive and profit margins much tighter for some than for others. At the time of writing, miners are experiencing a brief period of greatly improved profit margins as the dominant, hydro-powered Chinese competitors migrate machines between regions due to the end of the rainy season. This year, the migration has caused mining difficulty to drop by 16%, one of the largest drops ever, which shows the impact these massive mining operations can have; what does this concentration of hashing power in one region mean for other regions?
Supply shock: big investments on both the supply and demand sides
Grayscale Bitcoin reportedly
Trust and other funds are expected to hold 500,000 bitcoins by the end of this year, and their purchase rate has exceeded the rate of bitcoin mining. So, what impact does the emergence of these large buyers, including public companies such as Square and MicroStrategy, have on the mining industry?
As more institutions and private companies buy Bitcoin, this seems to have a positive impact on the BTC price, which in turn has a positive impact on miners. At the same time, due to the halving every 4 years, the role of miners in the market is decreasing, as new coins are issued as a smaller and smaller proportion of liquidity supply. This is good because it means that miners are less likely to crash the BTC price when they sell to cover their costs, and are less likely to suppress price increases when institutional and retail demand grows.
When we turn our focus back to the big companies involved in the mining industry themselves, competition is fierce, which makes the issue even more relevant. Since the beginning of the ASIC era in 2014, Chinese mining companies have had a large competitive advantage because the manufacturers were there and they were the first to get new hardware. Now that these big companies and investors have such a strong interest in Bitcoin, miners in Europe and America have gained better access to capital and formed closer relationships with manufacturers, which in turn has helped them scale their operations more effectively than in years past.
Ultimately, the emergence of institutional money has helped drive the redistribution of mining power in Western countries. So, from a mining decentralization perspective, this is very good. However, it also brings some other potential disadvantages, such as the introduction of KYC procedures tied to hash rate and the review of transactions from blacklisted wallets to make miners comply with government regulations. While this is inevitable to a certain extent, Braiins is already working on it through the mining protocol Stratum launched last year.
V2 is used to maintain the permissionlessness of mining and the censorship resistance of Bitcoin.
Mining Difficulty and Profitability
When large mining farms go offline, the total global computing power drops dramatically. To address this, the Bitcoin network has a mechanism that reduces the average hash rate required to mine a block, known as the difficulty, to ensure that blocks continue to be produced at roughly the same rate. Any reduction in the network's difficulty results in a proportional increase in mining revenue for the remaining miners. Typically, difficulty only drops after a significant drop in the price of Bitcoin, forcing inefficient miners to shut down ASICs (specialized mining computers) that are no longer profitable.
This time, this is not the case, because the price of Bitcoin has been rising, so miners are able to mine more BTC after the difficulty drops, and as a reward, the monetary value of these BTC has also greatly increased. This is a huge relief for miners who have been struggling with thin profits and high turnover since the halving in May 2020.
Since the bear market began in 2018, and especially after the halving, difficulty has increased much faster than price. As a result, the profitability of Bitcoin miners on a month-over-month basis is as follows.
Source: BTC Profit Calculator. BTC Profit Calculator; Monthly profit decreases over time as the difficulty to price ratio increases
Now the price has started to rise rapidly, and it has risen faster than the difficulty has risen. So, instead of continuing to decline over time, revenue and profit margins are increasing, which seems to be a good prospect for miners.
Monthly profit increases over time as price increases faster than difficulty (other variables held constant)
November was particularly profitable for miners because the rainy season had just ended in Sichuan, China. Miners operating there had to relocate their machines over the winter and spring to take advantage of cheap hydroelectricity. Unfortunately for other miners, this meant that much of the hashrate would be back online in the near future, so the difficulty reduction would be short-lived.
However, as long as prices do not fall back to October levels, rising prices will continue to boost miners’ profit margins in the coming months, even after all the hashrate that was suspended in Sichuan is brought back online elsewhere.
Open-source mining is becoming decentralized
As mentioned above, Bitcoin network hashrate is concentrated in China, in large part because leading hardware manufacturers such as Bitmain and MicroBT are based in China. This means Chinese miners have immediate access to machines, lower shipping costs, no international taxes or tariffs, and better connections to support teams and ASIC repair services. This has raised concerns about centralization, especially in a country where the government is heavily involved in every industry.
At Braiins, we try to reduce concerns about mining centralization in several ways. It all started in 2017-2018 when Bitmain had both the AsicBoost and Antbleed incidents. (For those who don’t know, I can summarize here that the hidden AsicBoost is Antminer
The performance-enhancing components in the S9 can increase mining efficiency by about 13%. Antbleed is a hidden backdoor in Bitmain’s firmware that allows Bitmain to remotely control and shut down ASICs).
At that time, MicroBT was not so strong, and Bitmain dominated the market, so these events were very worrying. The first thing Braiins did was to develop and launch Braiins in 2018.
OS, as the first publicly available SHA-256 with AsicBoost enabled
Open source firmware for the ASIC. Essentially this means that anyone can get the 13% performance increase on the ASIC for free, while also being able to see our full source code and verify if there are any hidden backdoors.
Earlier in 2020, Braiins took another important step and developed a new product called Braiins
The Enterprise Edition of OS+, which includes auto-tuning, further improves performance and makes mining more competitive and transparent, offsetting the supply chain advantages that Chinese miners have benefited from for years.
, you can see how the cost of mining one Bitcoin varies, even with the same ASIC (Antminer S9), depending on the firmware it runs.
Original firmware for Antminer S9
Antminer S9 is equipped with Braiins OS+ automatic tuning firmware.
Thanks to Braiins
OS+ can help miners improve profitability without having to invest in the latest and most expensive hardware, so its adoption is huge and continues to grow rapidly. This is important for two reasons in terms of concerns around mining centralization.
Fewer machines are running Bitmain firmware, which has a history of hidden features and backdoors.
The new Stratum V2 mining protocol included in the operating system will eventually give miners the right to decide which blocks transactions are included in, known as jobs.
Negotiation, rather than pool selection, gives more power to individual miners.
For most Bitcoin players who do not mine but care about decentralization, this second point is the most important. In order to make the Job Negotiation aspect of the protocol usable, Bitcoin
Core needs some modifications, but there are already thousands of miners using Braiins OS+ and Stratum V2. Once Bitcoin Core is updated, they can all use Job
Negotiation to help increase the decentralization of Bitcoin.
Overall, the mining industry is moving in a positive direction, and North America is becoming a new frontier for enterprise mining operations. China's share of the total network computing power is expected to decline in the next few years, and competition in the hardware manufacturing field has also led to positive developments in the mining industry. However, there is one area that has not improved much, that is, the centralization of mining farms, because except for Slush,
Apart from BTC Pool, all major mining farms are in China.
As demand for BTC continues to increase, and supply issuance decreases, the typical boom of all nascent technologies -
The bust cycle is playing out as expected for Bitcoin. Miners who think in 4-5 year time frames and manage to survive the bear market will reap fantastic profits in the coming months. Hopefully, Stratum
The adoption of V2 will help reduce China’s share of hashrate, ensuring a more transparent and decentralized future for Bitcoin mining.

On the one hand, the surge in currency prices may lead to an increase in market demand for Bitcoin, which in turn will attract more miners to enter this field. As the price of Bitcoin continues to rise, miners may increase their investment and purchase more advanced mining machines in order to obtain more profits when the price is high. For example, in 2021, the price of Bitcoin once exceeded $60,000. This price attracted a large number of miners to enter the market, promoting the sales of mining equipment and technological advancement. Miners hope to take this opportunity to improve mining efficiency by increasing computing power.

On a technical level, the competition in Bitcoin mining is also evolving. As mining machine technology continues to advance, new high-efficiency mining machines continue to emerge, and miners must constantly update their equipment to remain competitive. At the same time, the optimization of mining algorithms is also underway, and new algorithms may improve mining efficiency while reducing energy consumption. These technological advances have alleviated the pressure brought about by the surge in currency prices to a certain extent, allowing miners to remain profitable despite fierce competition.

With the development of the global economy and the popularity of digital currencies, the future of Bitcoin mining is full of variables. Faced with the ever-changing market environment, miners need to have the ability to respond flexibly in order to stand out in this economic game. Whether it is technological progress or market fluctuations, it will eventually affect the current status of Bitcoin mining and shape the future of the entire digital currency.