Bitcoin miners are being squeezed from two directions at once.

Since November, hashprice has fallen below $38 per PH per second, the lowest level in the decade since Luxor began tracking the metric in 2016. Bitcoin has also slipped to around $91,000, down 30% from its October peak, wiping out miners’ profit margins.

The profit squeeze stems from three heavy blows.

After the April 2024 halving, the block reward was cut from 6.25 BTC to 3.125 BTC, halving miners’ base revenue. Transaction fees now account for just 0.73% of revenue. Layer 2 networks have siphoned off traffic, sharply reducing demand for transactions on the main chain and pushing individual fees down from tens of dollars to just a few cents.

The more damaging problem is an oversupply of computing power. Network hashrate has stayed elevated at about 1.1 ZH per second, meaning more participants are sharing the same pie and each slice is naturally smaller.

A line between survival and failure has already appeared across the industry.

Large mining companies are looking for room to survive through geography. Marathon Digital, for example, has moved its computing power to wind power sites in Texas, bringing electricity costs down to $0.04 per kWh.

Bitmain, meanwhile, is upgrading equipment, replacing older S19 models with S21 mining rigs that deliver energy efficiency of 16 J/TH, cutting power consumption by 45%. Smaller and mid-sized miners have few options by comparison. Their Antminer S19 machines no longer generate any profit in regions where electricity costs $0.07 per kWh, and some forecasts suggest about 50 EH/s of small and mid-sized computing power will be forced offline this year.

Even the network’s own adjustment mechanism is struggling to help. Mining difficulty is dynamically adjusted every 14 days, but the current level, as high as 152 trillion, remains near a historic peak.

At most, that adjustment gives the most efficient miners a brief respite. Mining-related equities have already priced in the pressure: the WGMI ETF has fallen 43% from its high, with capital making its choice clear.

As block rewards continue to decline on a four-year cycle and transaction fees fail to fill the gap, what will crypto mining’s core purpose become if it is no longer simply about producing digital currency?

If computing power keeps flowing to regions with cheap electricity and concentrating among a handful of leading companies, will that gradually weaken Bitcoin’s decentralized foundation?

This brutal squeeze on profits may be the painful process an industry has to go through on its way to maturity.