Bitcoin miners are experiencing the worst profitability crisis on record: daily revenues fell to all-time lows and operating margins compressed.
This circumstance that the miners are experiencing is explained, as reported by CriptoNoticias, largely due to the collapse of the hashprice.
The hashprice is the income a miner earns for each unit of computing power they contribute to the network. It can be measured, for example, in “USD per PH/s/day” (dollars per petahash per second per day).
This value combines bitcoin (BTC) price, block rewards, and the difficulty effectwhich adjusts the probability of obtaining a block. When the difficulty rises or the price falls, the income per unit of power decreases.
At the beginning of December, the hashprice was $37.7 per PH/s/day. At the close of this note, it registers a slight rebound to almost 40 USD per PH/s/day, which represents an insufficient increase of close to 6%.
The image also shows that the most critical moment came on November 21, when the metric dropped to a historical minimum of 34.4 USD per PH/s/day.
The hashprice is mainly moved by the price of BTC. The value of bitcoin fell from almost $127,000 in October to below the $80,000 area and is currently trading above $90,000.
This volatility has a negative impact on the hashprice and miners’ profits.
An alternative indicator presents another reading of the market
In this difficult scenario for miners, a different reading proposed by a bitcoiner user known as “crypto Kakarot” appeared on X.
Its analysis is based on the indicator “Yardstick”, provided by the financial firm Capriole. This metric compares the market capitalization of bitcoin with the annual value of all BTC issued by the network.
The reasoning behind the indicator is simple: contrasts the market price with the rate at which new bitcoins are created. The analyst, through Yardstick, consider as follows:
Bitcoin would be extremely undervalued, much more undervalued even than during the worst of the 2022 bear market.
Crypto Kakarot, Bitcoin and cryptocurrency analyst.
Explains that, when the capitalization is well above the annual emission valuecan be interpreted as an “expensive” signal, since the market would be paying a high multiple for the new offer. But, when the opposite happens, “a sign that it may be undervalued.”
In this context, bitcoin is “undervalued”, what is suggested is that its current price would be below the value that the network generates according to its annual emission rate.
For some analysts, this difference functions as a potentially long-term bullish signal: If the market is paying less than what the network “produces”, there is room for the price to end up adjusting upwards over time.
It is not a prediction or a guarantee, but it is an indication that the value of BTC could be being underestimated in the current phase.
How does the “Yardstick” indicator offer a bullish view for bitcoin?
The following chart created by Capriole shows how the Yardstick indicator behaves in relation to the price of bitcoin.
In the upper part the daily evolution of the market is observed, while in the lower section the value of the Yardstick appears, represented as a light blue or green line that oscillates between areas considered of greater or lesser relative valuation.
When that oscillating line approaches low levels (like the range near 0.43 currently recorded) it suggests that the market price would be below the value that, based on the annual issuance of BTC, could be considered reasonable.
That reading coincides with Kakarot’s approach. As reflected in the chart, the indicator remains in the lower zone (green line), even after the recent price recovery to cross the $90,000 line.
For this analyst, this persistence is a sign that the drop in mining profitability contrasts with a possible undervaluation of the asset from a perspective based on its emission.
In other words, while miners are going through one of the worst times in terms of revenue, Yardstick suggests that the market may not be fully recognizing the value that the network produces through its annual creation of new BTC.
Finally, the analyst concludes with a comment addressed to those who anticipate additional falls:
But don’t worry, some say that the bear market is starting now… Be careful with those who sell out of fear and end up buying green candles late… Trading on emotions doesn’t usually turn out very well…
Crypto Kakarot, Bitcoin and cryptocurrency analyst.
Thus, although Yardstick does not alleviate the operational difficulties of miners, it provides a positive reading.