Bitcoin Mining Squeeze: Difficulty Rises as Margins Thin

Bitcoin miners are navigating increasingly precarious financial waters as the network’s next difficulty adjustment approaches. According to CoinWarz data, the adjustment expected at block 927,360 will push the target from 149 trillion to approximately 150 trillion. While this represents a modest increase, it comes at a time when mining operations are already operating with razor-thin margins. The persistent strength of hashpower continues to drive difficulty upward even as miner returns remain near record lows.

The critical metric of hashprice, which measures revenue per petahash per day, currently sits at approximately $38.3 PH/s according to Hashrate Index data. This represents a slight improvement from the recent trough below $35 PH/s recorded on November 21, but remains dangerously close to the $40 PH/s level that industry reports identify as the break-even point for many operations. When revenue per petahash falls below this threshold, miners face difficult operational decisions about whether to continue operating at a loss or temporarily shut down equipment.

Network statistics reveal that average block times have remained remarkably stable, hovering close to the 10-minute target with recent averages around 9.97 minutes. This stability contributed to the most recent difficulty adjustment that saw the network difficulty decrease from 152.2 trillion to 149.3 trillion, providing only temporary relief before the anticipated upward adjustment.

The Bitcoin mining industry faces significant supply chain risks stemming from regulatory scrutiny of its primary hardware provider. Reports indicate the US Department of Homeland Security has launched an investigation into Bitmain, the China-based manufacturer of Application-Specific Integrated Circuit (ASIC) mining machines. The probe centers on concerns that Bitmain’s equipment could be accessed remotely, raising national security implications.

According to data from the University of Cambridge, Bitmain controls approximately 80% of the global ASIC market, creating substantial concentration risk for the entire mining industry. This market dominance means that any regulatory action against Bitmain could have cascading effects throughout the Bitcoin mining ecosystem. Potential US government restrictions, tariffs, or other limitations could result in higher hardware costs, delayed deliveries, and disrupted expansion plans for mining operations worldwide.

The investigation comes at a particularly challenging time for miners who are already grappling with profitability concerns. Any disruption to the supply of new mining equipment or increased costs for existing hardware would further compress already thin margins, potentially forcing less efficient operations to cease activities entirely.

Despite a recent uptick in Bitcoin mining activity within China, experts believe Beijing is unlikely to reverse its official ban on cryptocurrency mining. Data from Hashrate Index shows China’s share of global hash rate has increased from 13.75% in the first quarter of 2025 to 14% in the current quarter, placing the country third behind the United States and Russia in mining dominance.

This modest recovery represents a significant shift from the complete collapse of China’s mining industry following the July 2021 ban, when the country’s hash rate fell to zero according to Cambridge index historical data. Unofficial mining activity quickly resumed, pushing China’s share back to 22.29% by September 2021, though the Cambridge mining map ceased updates in February 2022, leaving current estimates to other data providers.

Some scholars have urged Chinese authorities to reconsider the mining ban, arguing that miners could utilize excess energy that would otherwise be wasted. However, experts familiar with Beijing’s policy stance indicate that a formal reversal remains improbable. The Chinese government has consistently maintained that cryptocurrency activities disrupt financial order and enable illegal behavior, concerns that continue to outweigh any potential economic benefits from renewed legal mining operations.

The combination of rising network difficulty, break-even profitability, hardware supply chain risks, and persistent regulatory uncertainty creates a perfect storm for Bitcoin miners. As the industry approaches December, operators must make critical decisions about whether to continue mining at potentially unprofitable rates or temporarily shutter operations until conditions improve.

The interconnected nature of these challenges means that developments in one area could exacerbate problems in others. For instance, regulatory action against Bitmain could reduce the availability of efficient mining hardware, making it more difficult for miners to maintain profitability as network difficulty increases. Similarly, any significant shift in China’s mining activity, whether through enforcement of existing bans or unexpected policy changes, could dramatically alter global hash rate distribution and network security.

With hashprice hovering just below the critical $40 PH/s break-even level and multiple external pressures mounting, the Bitcoin mining industry faces one of its most challenging periods in recent years. How miners navigate these converging challenges will have significant implications for network security, hardware markets, and the broader cryptocurrency ecosystem in the months ahead.