ETH mining, which was worth tens of billions of dollars, continued for eight years before it was terminated in 2022.
A law in New York State imposed a two-year moratorium on new permits for proof-of-work cryptocurrency mining operators.
Core Scientific, one of the largest listed mining companies in North America, filed for bankruptcy in December. In 2022, the bankruptcy of mining companies hit market confidence hard.
According to TheBlock, BTC miners only earned $9.47 billion in 2022, a drop of nearly $7.3 billion year-over-year. As crypto prices go down, mining has become less profitable. This, coupled with the stringent regulations and black swan incidents, made 2022 a particularly rough year for crypto miners. That being said, miners must still get on with their lives. Today, we will review the series of incidents that took place in the crypto mining industry in 2022, which might shed light on crypto investment in the future.
1. In 2022, the Bitcoin hashrate surged by nearly 98%
BTC hashrate hit new highs and peaked at over 310EH/s.
Data from glassnode shows that affected by a hawkish Fed, global liquidity crunch, and geopolitical conflicts, Bitcoin has remained bearish in 2022, and the BTC price plummeted compared to the figures recorded in 2021. Despite that, the average BTC hashrate trended upward throughout the year partly because the crypto bull in 2021 attracted droves of investors to the space. Meanwhile, a large number of crypto mining companies became listed, which expanded the scale of BTC mining. According to Arcane Research, listed mining companies hold approximately 20% of all BTC hashrate.
In July 2021, Celsius, a giant in crypto lending, filed for bankruptcy, and its mining branch auctioned off plenty of mining machines, which brought the price of BTC mining machines to the lowest level in nearly two years. At the same time, the BTC hashrate also plunged, with the average hashrate dropping to 160.31EH/s on July 13, 2021.
Overall, BTC hashrate stood at 137.67EH/s on January 1, 2022 and surged by nearly 98% in late 2022.
2. BTC difficulty exceeded 36T in November, with an annual increase of 31.36%
As the network hashrate went up, Bitcoin’s mining difficulty also kept rising. After the latest difficulty adjustment that took place on December 19, 2022, the BTC difficulty stood at 35.36T, up 31.36% year-over-year.
Data provided by BTC.com indicates that in 2022, the BTC difficulty was adjusted 26 times, 15 of which featured an increase in mining difficulty.
3. BTC miners earned $9.47 billion in 2022
According to TheBlock, the annual revenue of Bitcoin miners in 2021 was $16.77 billion; in 2022, the figure dropped to $9.47 billion, a year-on-year decrease of about 43.5%.
The total revenue of miners consists of block rewards and transaction fees. In particular, block rewards constitute the primary source of revenue for miners and account for over 96% of their revenue. In May 2020, Bitcoin went through its third halving, reducing the block reward from 12.5 BTC to 6.25 BTC, a substantial drop. Meanwhile, 2021 witnessed a crypto bull, which encouraged frequent crypto transactions. Due to these factors, transaction fees now make up for a larger share of the total mining revenue.
4. Increasingly stringent crypto regulations: the world is trending toward clean energy
The New York State Senate passed a two-year moratorium on cryptocurrency mining on June 3, 2022. New York governor Kathy Hochul signed the PoW mining moratorium into law on November 22, making it the first state in America to ban any PoW crypto mining activity for two years.
The PoW mining moratorium will not only prohibit new mining operations but also refuse the renewal of licenses to those who are already operating in the state. Furthermore, any new PoW mining operation in the state could be legal only if it uses 100% renewable energy.
In the Digitalising the energy system — EU action plan released on October 18, the European Commission urged member states of the EU to be prepared for terminating crypto mining, given the current energy crisis and the heightened risks for the coming winter.
Affected by such regulations and policies, some mining institutions are expanding the use of sustainable energy. At the moment, the use of sustainable energy in Bitcoin mining is rising. According to the report released by the Bitcoin Mining Council for Q3 2022, the institution now accounts for 45.4% of the total Bitcoin hashrate, and the members of the BMC and participants in the survey are currently utilizing electricity with a 67.8% sustainable power mix, an increase of about 3% year-on-year. As countries roll out more policies, crypto mining will gradually shift from traditional energy to clean energy.
Could crypto mining reverse the continued decline and bounce back to its peak? We might soon find out the answer in 2023.