The Bitcoin mining industry is facing increased economic pressures as a record-high hashrate coincides with a falling Bitcoin price. This combination is squeezing miner profitability and extending the payback periods for mining hardware.

The network's hashrate, which measures the total computing power competing to secure the Bitcoin network, climbed to a record 1.16 zettahash per second (ZH/s) in October. At the same time, Bitcoin's price has fallen towards $81,000 in early November. The combined effect has pushed hashprice, which tracks miner revenue per unit of computing power, below $35 per hash, a significant drop from the third quarter average of $55 per hash. This is also below the $45/PH/s median total hashprice reported by public mining companies, causing many operators to approach breakeven levels.

A report by The Miner Mag indicates that payback periods for mining rigs have stretched beyond 1,200 days, and rising financing costs are adding further strain. The downturn follows a relatively stable third quarter, where hashprice averaged around $55/PH/s, supported by Bitcoin trading near $110,000.

The financial strain has also coincided with increased borrowing by miners, initially driven by near-zero-coupon convertible bonds. While miners are increasingly pivoting towards AI and high-performance computing (HPC), revenues from these ventures are not yet sufficient to offset the decline in Bitcoin mining income.

Despite the tightening economics, the top ten publicly traded miners experienced gains, with CleanSpark, Cipher Mining, and IREN posting double-digit increases. This surge followed a JPMorgan research note that raised price targets for these miners, citing a surge in long-term HPC and cloud deals.

However, there are indications that some miners are beginning to scale back operations. Bitcoin's seven-day moving hashrate average has decreased from approximately 1.124 ZH/s in mid-November to around 1.06 ZH/s, suggesting that some operators may be unplugging hardware as margins tighten.

This contraction in mining profitability follows a period of low transaction-fee revenue and rapid expansion in deployed hashrate since the last halving, making operators more vulnerable to market-driven fluctuations in hashprice. Despite the current challenges, some analysts suggest that a major capitulation event is less likely.

Even with declining profitability, some miners are maintaining relatively high profit margins due to increased efficiency of mining rigs. For example, the S21 XP model boasts a 58% profit margin, compared to the S21's 51% margin during the previous hashprice low on August 4, 2024. As new, more efficient models like Bitmain's Antminer S23 are introduced, margins are expected to improve further.