10 Bitcoin Mining Predictions for 2023

2023 is here, and we can finally put the dreadful Bitcoin mining year of 2022 behind us. We are all curious about what this new and fresh year will bring for the Bitcoin mining industry.

What will miners focus on this year? What will happen to the nearly bankrupt public miners? And the most interesting question – how could Bitcoin’s price and hash rate develop in 2023?

This article attempts to answer such questions by providing our 10 Bitcoin mining predictions for 2023.

Here’s a list of Bitcoin Mining Predictions for 2023:

1. The Bitcoin bear market will come to an end
2. Bitcoin’s hash rate growth will slow down
3. The number of public miners will decline
4. Hosting prices will fall
5. Cost minimization will be essential in 2023
6. ASICs will become dirt cheap
7. Miners will struggle with achieving sufficient up-time
8. Regulators will keep targeting Bitcoin mining
9. Miners will work on strengthening their balance sheets
10. Miners will increasingly utilize Bitcoin mining derivatives

1. The Bitcoin bear market will come to an end, but we won’t see another full-scale bull market yet

The latest live price of Bitcoin is an important factor for many investors to consider when making investments, as seen on the Gate.io cryptocurrency exchange, and is the most critical factor affecting the mining industry. Therefore, we first embark on the seemingly impossible challenge of predicting the future Bitcoin price.

Bitcoin has historically gone through some remarkably similar bull and bear cycles. It can be helpful to compare the current bear market to previous ones to estimate how bad the current one could get and how long it could last. As Arcane Research points out in its 2022 year-end report, Bitcoin’s current bear market has lasted for 376 days, a length comparable to the bear markets of 2014-15 and 2018.

The current peak-to-through drawdown of 78% is also not far from the maximum drawdowns of 2015 and 2018 of 85% and 84%. Judging by historical cycles, the current bear market looks like it will soon end.

Also, the only reason Bitcoin fell below $25k was extensive forced selling due to the downfall of several overleveraged market participants. Without this forced selling, the latest Bitcoin price would still trade in the $25k to $30k territory from the Gate.io crypto exchange. As the overleveraged dominoes finish falling, the Bitcoin price could return to these levels.

Although the bear market could soon end, it is still too early for another full-scale bull market to commence. Bitcoin price growth is primarily driven by new capital flowing into the space. In 2023, we will likely see few outsiders starting to allocate capital to crypto and Bitcoin, as the extreme market chaos and outright scams of 2022 have scared many away from the sector.

It will take time before traditional finance firms are ready to build Bitcoin exposure, and we will likely have to wait patiently for another one or two years before market participants are prepared to embark on the next bull cycle.

2. Bitcoin’s hash rate growth will slow down

Hashrate steadily grew in 2022 as Bitcoin miners finally realized their massive expansion plans initiated during the bull market of late 2021. This year confirmed what we have seen during several cycles historically: Hash rate follows Bitcoin‘s price with a lag of several months, as it takes time to manufacture mining rigs and build sites.

We will most likely see the hash rate growth slow down in 2023, as the poor mining economics of 2022 didn’t incentivize capacity expansion. The hash rate coming online in 2023 will mostly be delayed by capacity expansion miners initially planned to add in 2022. This delayed capacity will come online during the first half of 2023. After that, the hash rate will stop growing and perhaps even contract, depending on the Bitcoin price.

3. The number of public Bitcoin miners will decline as they go private or merge

Public Bitcoin mining companies have better access to capital than private ones, particularly during bull markets. Still, being public also comes with several disadvantages. Arguably, the most significant burden of being a public company is strict reporting requirements that can be difficult and expensive to comply with.

After a devastating bear market, many public miners have been degraded to penny stocks with market caps below $50 million, which don’t exactly justify spending millions of dollars on annual reporting. These companies could drastically reduce administrative costs by going private.

Some public miners will not go private but merge with other companies to share administrative costs and leverage economies of scale.

4. Hosting prices will fall as infrastructure gets deployed, and miners are washed out

One of 2022’s (many) undesirable trends were rising hosting costs.

In the North American context, the Bitcoin mining gold rush precipitated by China’s mining ban in 2021 flushed the US and Canadian mining industry with activity and capital. The North American mining industry was not equipped to accommodate the influx of business from China and the surge of interest in mining from North American investors.

Infrastructure build-outs took time to react to the migration, and in 2021 and 2022, amble rack space was hard to come by in the North American market. It was a hosting providers’ market, so to speak, wherein hosting companies could charge higher rates due to the rack space shortage and market demand. Electricity rates also went up in 2021 and 2022, exacerbating the rise in hosting costs.

2023 will likely see the opposite trend emerge. As new build-outs finally come online, hosting providers will compete for clients in a much more adverse market environment (hash price is currently $60/PH/day, compared to 2021 and 2022’s average of $315/PH/day and $124/PH/day, respectively). Moreover, the breakeven cost of a 100 TH/s S19j Pro is $0.082/kWh at current hash price levels, so many miners higher up the cost ladder are already operating at neutral or negative margins. If the hash price drops further from here – and we expect it will – miners, even with average power/hosting rates, will face breakeven costs or negative margins.

Given the abysmal state of mining economics and the influx of competition, hosting providers will need to lower their costs to remain competitive in 2023. Those hosts who can’t or haven’t negotiated low enough power rates to maintain their own margins will struggle in 2023’s adverse market environment.

5. Cost minimization will be the name of the game in 2023

The profit margin of Bitcoin mining has become so slim that miners are heavily incentivized to reduce costs. In 2023, miners will do their best to lower operational expenses.

Electricity is the most significant part of a miner’s operational cost structure and will naturally be the top priority to minimize. Miners can lower their electricity costs by setting up operations close to stranded energy sources, helping balance the grid, or selling excess heat. This bear market will force miners to become more sophisticated in how they consume electricity.

In addition to lowering their all-in electricity prices, miners will attempt to get more hash rate per unit of electricity consumed by improving the efficiency of their mining rigs. The miners with good access to capital will switch their older machines to newer models like the Antminer S19 XP. Others will underclock machines to improve efficiency.

While electricity is the most crucial cost component to minimize in the long term, lowering administrative costs is the most significant immediate potential for cost minimization in the Bitcoin mining industry. Many Bitcoin miners, particularly the public ones, have seen their administrative costs implode over the past two years as the rapid growth during the bull market didn’t incentivize prudency. These companies will now lower executive compensation and other administrative…