I just reviewed the profitability numbers for the miners, and things are looking pretty grim. According to the regression model they use to estimate production costs, miners are spending around $88,000 per BTC while the price hovers around $73,700. That means each coin they mine costs them nearly $15,000 more than its market value. Essentially, they are operating at a 20% loss on each block.

The situation worsened due to the geopolitical crisis in the Middle East. Oil prices surged above $100, the Strait of Hormuz is virtually closed, and that directly impacts electricity costs. It’s estimated that between 8-10% of the global hashrate is in regions sensitive to these energy supply issues. The result is that mining difficulty dropped 7.76% last Saturday, the second-largest decline of the year. The hashrate retreated to 920 EH/s, well below the recent record of 1 zettahash.

What’s interesting is that when miners can’t cover their costs, they are forced to sell Bitcoin to fund operations. This adds more supply pressure to an already complicated market: 43% of the total supply is in loss, whales are distributing during rallies, and there’s a lot of accumulated leverage. Publicly traded mining companies are already pivoting toward AI and high-performance computing because Bitcoin margins have become unsustainable. The next difficulty adjustment, expected in early April, will likely continue downward if Bitcoin stays below $88,000. The network self-corrects, but the period between when costs exceed revenues and when difficulty drops enough is where the real damage occurs—both for miners and for the spot market that absorbs their forced sales.