Bitcoin miners face worst profitability crunch on record, analyst says

Bitcoin miners are facing the harshest operating environment in the asset’s history, with daily potential revenue now falling below median all-in costs and payback periods stretching beyond the next halving cycle, according to BRN — even as a modest liquidity rebound cushioned crypto markets following Monday’s flash-crash dip.

The “all-in cost” for bitcoin miners refers to the full expense required to produce one unit of BTC. It factors in far more than just electricity, including power consumption, machine depreciation, hosting fees, labor, maintenance, cooling, and the capital expenditure needed to upgrade hardware as the network becomes increasingly competitive — the closest thing the sector has to an actual “production price” for bitcoin. However, specific costs will vary for each individual operator.

Potential revenue per PH/s of hashing power per day has dropped from roughly $55 in the third quarter to about $35 today, BRN Head of Research Timothy Misir said in an email. That level sits well under the $44 median all-in cost base for major public miners and comes as the network’s hashrate holds near 1.1 zettahash, he noted.

“The squeeze is historic,” Misir continued. “Payback periods are now extending past 1,000 days — longer than the time until Bitcoin’s next halving. Capitulation risk from smaller miners is rising, and any renewed dip toward sub-$85K could force distressed selling.”

The pressure adds a new dimension to a market still stabilizing after a violent deleveraging early in the week. Bitcoin briefly recovered to about $87,000, but analysts say the bounce lacks sponsorship from miners, whales, or macro flows — the usual wellsprings of sustainable upside.

Bitcoin cost basis distribution heatmap | Image: Glassnode

Liquidity lifts but conviction lags

Despite Monday’s shock drawdown, markets have steadied. Bitcoin reclaimed part of the slide, while altcoins showed little appetite for risk. ETH sat near $2,800, BNB at $830, and SOL around $125. Total crypto market capitalization edged up to $3 trillion, but trading interest remained thin after nearly $1 billion in liquidation-driven volatility from the Dec. 1 selloff.

“Liquidity has returned, but momentum hasn’t,” Misir said. “The market is searching for an equilibrium, not staging a recovery.”

The Federal Reserve formally ended quantitative tightening this week, injecting $13.5 billion into the banking system in the second-largest liquidity boost since the 2020 pandemic. Such an infusion would typically ignite risk sentiment, but crypto’s muted response shows how fragile positioning persists.

Soft macro data reinforced that picture. The ISM Manufacturing PMI undershot expectations at 48.2, extending the contraction streak and signaling subdued industrial demand. Gold and silver have outperformed dramatically this year — up 60% and 102%, respectively — while Bitcoin sits down 10% on the year, underscoring a broader rotation toward defensive hard assets.

ETF flows split as traders brace for volatility

Spot ETF flows reflected mixed sentiment. U.S. bitcoin ETFs logged $8.48 million in net inflows on Dec. 1, extending a four-day streak.

Furthermore, XRP ETFs added $89.65 million, while Solana products posted $13.55 million in outflows. Ethereum ETFs saw a sharp reversal, with $79.06 million pulled after five straight days of inflows, according to The Block’s data dashboard.

Meanwhile, options markets signaled that traders are increasingly positioning for turbulence into year-end.

“Crypto is bleeding as liquidity evaporates,” said Nick Forster, founder of Derive.xyz. “Volatility has surged, skew has collapsed, and traders are stacking puts, especially at the $84K and $80K strikes.”

Forster said 30-day BTC implied volatility has climbed from 46% to almost 50% in the past 24 hours, with short-dated implied volatility now exceeding long-dated. This setup historically precedes outsized spot swings, Forster stated.

Derive’s probability models now place a 15% chance of Bitcoin finishing the year below $80,000, down from 20% last week. Conversely, the odds of BTC ending 2025 above $100,000 have risen to 21%, while ETH has a 23% chance of closing above $3,500.

“The market is bracing for volatility,” Forster said. “But it’s also pricing slightly fewer catastrophic outcomes than it was a week ago.”

Bitcoin changed hands near $87,300, up slightly after Monday’s flash crash, The Block’s price page shows. Major alts like ETH, SOL, and BNB showed tepid price action on Tuesday as markets advanced toward a flurry of macro data releases.